Can Intel Compete With Cable? Fat Chance

The conventions of mainstream journalism prevent The Wall Street Journal from saying in a report today what it really thinks about Intel’s new effort to compete with cable and satellite companies. The paper says that Intel is developing a full-fledged pay TV service to be distributed over the Internet. But you can pretty much tell the paper’s view by its use of the widely understood code to say that the idea is nuts. The Journal, reverting to the third person, says “it remains unclear” whether Intel can make its plan work. Good thing the paper added that caveat: There’s widespread scoffing in the media world today over Intel’s plans. According to the Journal, the chip maker wants to launch by year end, and has asked programmers for their “rate cards” for offering networks and shows. TiVo CEO Tom Rogers told investors at the Barclays Internet Connect Conference that “I did get a chuckle” out of that. What’s wrong with Intel’s plan? It isn’t a question about technology. “They’ve got the set top box concept down,” Bernstein Research analyst Todd Juenger says. “Now, all they need is… everything else.”

And that’s a problem because programmers basically like the current arrangement where they can force-feed packages of channels to distributors — who in turn require consumers to pay for dozens of services that they never watch. It’s a great deal for Big Media: Most of the major players’ profits come from fees cable and satellite providers shell out, and the ad sales companies collect, from pay TV. Why rock the boat? And Intel couldn’t give consumers a bargain. Programmers won’t give the company a break on pricing. If they did, then all of their current distributors — who have lots of real, paying customers — would demand lower rates. What’s more, if there was even a hint that an Intel service had traction, then cable operators — the dominant providers of broadband services — would switch to usage based pricing. In other words, Intel’s customers would have to ask themselves when they sit down in front of the tube whether it’s worth running up the meter. “It is very hard to see how the cable operators won’t easily be able to under-price that bundle” from Intel, Rogers says. So good luck, Intel. You’ll need it.