Media Companies Hesitant to Strike Content Deals With Intel Video Service14 Jun, 2013 By: Erik Gruenwedel
Unlike Netflix, Amazon or Redbox Instant, Intel’s pending online video service plans to offer live TV, which pits it against the lucrative pay-TV ecosystem
Intel Corp.’s pending online video service reportedly is facing resistance from media companies, which have content the chip maker depends upon to launch an over-the-top multichannel video program distribution (MVPD) platform.
Unlike Netflix and other subscription video-on-demand services delivering largely repurposed TV programming and windowed movies, Intel’s unnamed service would also offer live broadcast TV — a scenario that could upset the current pay-TV ecosystem and its lucrative revenue streams to media companies.
Indeed, content holders generate hundreds of millions of dollars annually in retransmission and carriage fees, a gravy train that could be upended by Intel’s new platform, according to the Wall Street Journal, which cited sources from both media companies and broadcasters.
Intel’s online service reportedly will include a set-top box, proprietary programming guide and high-definition video camera that can track who is watching what kind of content, among other features.
In addition to media company reluctance, traditional MVPDs such as cable and satellite TV are employing clauses in contracts stipulating exclusivity of content to facilities-based MVPDs versus non-facilities based virtual MVPDs — despite the practice running counter to regulatory guidelines, said BTIG Research analyst Richard Greenfield.
“While we never expected MVPD/ISPs to openly embrace virtual MVPDs, as it meant losing video service revenue, we hoped the need for a superior broadband package (at extremely high margins) would drive them to accept the emergence of virtual MVPDs (especially given the highly competitive, lower margin-by-the-day video business),” Greenfield wrote in June 11 post.
Time Warner Cable, in a statement to the WSJ, defended the practice in part as a standard operating procedure in the entertainment industry.
“It is absurd to suggest that, in today's highly competitive video marketplace, obtaining some level of exclusivity is anticompetitive,” TWC said.
Regardless, Intel said it expects to launch the video service by the end of the year.