Intel Corp. (INTC:US), shifting strategy for its planned Web-based television service, is now seeking partnerships to jumpstart the project, said a person with knowledge of the situation.
The company may miss a stated goal of starting service by year-end, said the person, who asked not to be named because the plans are private. Intel, based in Santa Clara, California, is looking for a partner with a base of Internet subscribers or rights to films and television shows, the person said.
Intel’s TV efforts have slowed under Chief Executive Officer Brian M. Krzanich, according to the person. The new CEO, who took the reins in May, has emphasized getting Intel chips into mobile devices. The shift in strategy for its TV effort reflects a view within Intel that the company, which has built an advanced set-top box, needs a partner with existing customers and marketing experience to make it a success.
“For Intel or anyone else to launch and pay the networks what they’re getting from the cable companies makes it a very difficult proposition,” said Bernard Gershon, a New York-based digital television consultant.
A spokesman for Intel declined to comment. Potential partners who have had discussions include online retailer Amazon.com Inc., which runs a pay-video service, and TV set maker Samsung Electronics (005930) Co., the website All Things D reported, citing people familiar with Intel’s plans.
Samsung has no information to share at this time, Lauren Restuccia, a spokeswoman for the company in New Jersey, said in an e-mail. Drew Herdener, a spokesman for Seattle-based Amazon, declined to comment.
Slowing progress toward starting the TV service marks a setback for Intel’s broader effort to diversify its revenue and lessen its dependence on the declining personal-computer market for growth. Investors have low expectations for success, said Doug Freedman, an analyst at RBC Capital Markets in San Francisco, who rates Intel outperform.
“They have talked about being not just the set-top box but the ecosystem,” Freedman said. “And in the past, when Intel has tried to mess with ecosystems outside of PCs, they have been unsuccessful.”
Intel fell 1.8 percent to $22.98 at the close in New York, the biggest drop among members of the Dow Jones Industrial Average. (INDU) The shares have advanced 11 percent this year.
Intel has been working on a Web-based television product since at least early 2012. Erik Huggers, general manager of Intel Media, said in February that the company planned to start service this year.
The company is trying to offer pay television through Web connections, creating new competition for incumbent providers like Time Warner Cable Inc. (TWC:US) and DirecTV. (DTV:US) The service would give consumers, who increasingly view TV on their own schedule, wherever they are, access to content across TV sets, smartphones and mobile devices. Intel plans to offer both channels with live programming and a large library of video-on-demand.
The company continues to negotiate for programming and may have agreements in place within weeks, according to the person. Progress toward a broader partnership may also be made during that timeframe, the person said. Contractual terms with content providers prevent Intel from forming a partnership with a traditional pay-TV provider, the person said.
“If they shut it down, it might be a good thing, because it would mean they are focusing on markets where they have core competencies,” Freedman said. “What does Intel know about media distribution?”
Intel has been testing the service among employees as it seeks programming from media companies such as Time Warner Inc., Comcast Corp. (CMCSA:US)’s NBC Universal and Viacom Inc. (VIAB:US) The company had sought to build a service that would rank alongside DirecTV, the biggest U.S. satellite-TV service with more than 20 million subscribers.
Sony Corp. (6758), Google Inc. and Apple Inc. are also working on Web-based pay-TV services, which offer advantages in reaching younger viewers who are just as likely to watch shows from Netflix Inc. (NFLX:US) or Amazon.com on their smartphones as traditional TV linked to a set-top box.
An Internet TV provider would have to pay as much or more than cable and satellite services and offer a suite of channels, ESPN President John Skipper said at a press conference last month.
“We’re not going to offer one-offs,” Skipper said. The network includes the flagship channel, plus others such as ESPN2 and ESPN News.
Under Krzanich, Intel is devoting more resources to faster, more energy-efficient processors for smartphones and tablets. As people increasingly turn to mobile devices to surf the Web, send e-mail and watch video, the PC business is set to contract for a second straight year, dragging down sales at the world’s largest chipmaker.
“Intel was slow to respond to the ultra-mobile PC trends,” Krzanich said in a July conference call. “We have made several strategy and priority changes that will allow us to focus and win in that environment.”
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