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Verizon Acquiring Intel's Scuttled Online Video Service

21 Jan, 2014 By: Erik Gruenwedel

Telecommunications giant co-owns Redbox Instant with Outerwall

As expected, Verizon Communications said it is acquiring the assets of Intel Media, a business division developing cloud-based TV products and services. Terms of the transaction were not disclosed, but media speculation has pegged the purchase price from $200 million to $500 million.

Verizon is purchasing intellectual property rights and other assets that enable Intel's OnCue Cloud TV platform. Verizon said it would make employment offers to all of the approximately 350 people working at Intel Media, which will continue to be based in Santa Clara, Calif., and led by its current management team headed by Erik Huggers.

The transaction is subject to regulatory approvals and is expected to close early in the first quarter of 2014.

When first announced, Intel Media’s OnCue cloud TV platform generated significant buzz as a potential competitor to subscription streaming services such as Netflix, and online video properties Apple TV, Google TV and Roku, among others.

But escalating license fees for third-party content (CBS boss Les Moonves frequently crowed about OnCue's incremental revenue opportunities) led Intel management in 2013 to shelve launch plans and sell the unit.

Verizon CEO Lowell McAdam said the telecommunications giant would incorporate OnCue with its FiOS TV service, among other properties, which includes co-ownership of Redbox Instant.

"The OnCue platform and team will help Verizon bring next-generation video services to audiences who increasingly expect to view content when, where and how they want it,” McAdam said. “This transaction provides us with the capabilities to build a powerful, capitally efficient engine for future growth and innovation. We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices."

Indeed, last month Verizon agreed to acquire EdgeCast, an online content delivery networks. Also, Verizon announced the acquisition of upLynk's technology that streamlines the process of uploading and encoding of video for live, linear and video-on-demand content.

Eric Wold, analyst with B. Riley & Co. in Los Angeles, said the acquisition paves the way for Verizon to expand its video offerings to consumers through a virtual multichanel video program distribution.

"They could offer consumers a comprehensive physical/digital offering that would be unmatched in terms of media choice and convenience and could, at the same time, dramatically expand Redbox Instant's reach and path to profitability," Wold said in an email.

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