Over the past dozen years or so, Intel has repeatedly demonstrated that it has a tin ear when it comes to consumer electronics. Despite a long trail of failure, the tenacious chipmaker keeps coming back with one bad idea after another.
Its latest scheme has Intel going toe-to-toe with... wait for it... Comcast, Time Warner Cable and DirecTV. Yes, Intel — Intel! — plans to launch an online pay-TV service delivered through its own set-top box.
This isn't a new idea. Apple, Google and Microsoft have also wanted to reshape television in a similar way, but have yet to convince Time Warner, NBC Universal and Viacom to license their TV shows and movies in a way that would give Internet TV a fighting chance. Go figure. And so none of them have moved forward.
A Desperate Intel
Intel, however, is plowing ahead. Why? Because it's desperate to break into new markets as sales of PCs, the majority of which are powered by Intel microprocessors, continue to deteriorate. The meteoric rise of smartphones and tablets that eroded the PC business blindsided Intel, which has had little success in supplying chips to these new markets. In the fourth quarter ended in December, Intel net income fell 27% year to year and revenue was down 3%.
The speed with which the PC market is vaporizing has made Intel willing to take on a lot of risk. According to Bloomberg, Intel is making progress in talks with media companies. But what that means isn't clear.
As a smaller operator, Intel would likely pay more for TV channels and movies than incumbent cable, satellite and telecommunications companies, which spend almost $38 billion a year licensing TV channels according to the Wall Street Journal. Media companies have no incentive to anger current licensees — much less cut into their potential profits — by agreeing to any terms that would give Intel an advantage.
So Intel will be paying more to go to market with a service that looks, well, a lot like what its larger rivals are already selling — only, maybe, less so. In addition, Intel would be dependent on broadband services to deliver its pay TV services. This could be a problem if cable and telecoms decided to ratchet down their data caps.
Intel's set-top box could offer unique whiz-bang features, such as a camera for video-conferencing and personalizing content based on facial recognition. But that won't be enough, since people watch TV for the programming, not what's inside the set-top box.
Intel's history is a study in how not to combine technology with entertainment. Each of its attempts follows the same lame pattern: Intel hypes its plans at the Consumer Electronics Show, then programs its executives to continue slinging marketing BS in interviews with the press. Eventually, the whole venture falls apart, usually with in a year or so.
In 2010, Intel launched chips and big plans for partnering with manufacturers to build the "smart TV," which was really nothing more than a set that would let users run apps and tap into the Internet while watching programs. The problem: no one wanted to play with apps on their TV. So Intel pulled the plug in 2011.
In 2006, Intel embarked on another would-be game changer, Viiv. This chipset for Windows PCs running Microsoft's Media Center was going to turn PCs into entertainment hub — along the way, moving the battle with viruses, software updates and computer crashes to the living room. The Intel hype machine churned into high gear, at least until the first Viiv PCs came out.
As The Washington Post reported, the typical Viiv box offered little more than a "smattering of free Web video clips and discounts on online music, movie and game rentals — plus a nifty rainbow-hued Viiv sticker on the front of the computer." By 2008, Viiv was dead.
In 2001, Intel was pondering slower-than-expected demand for its Pentium 4 chips and a modest 10% growth in its core microprocessor business. So the company decided to jump into the market for digital music players with a $300 gadget to take on the leading models from Sony, Philips and the Rio division of Sonicblue.
Unexpectedly, though, Apple released the iPod later that year and wiped out all its competitors. Including Intel.
Despite its money and army of smart people, Intel simply doesn't get the consumer electronics market, and likely never will. The company is very good at building the innards of PCs, including chips, memory and motherboards, but has shown little talent for doing much else.
Rather than launch pay-TV services that will take the company in a direction far beyond its expertise, Intel has to get much better at picking market winners. Missing out on the smartphone and tablet craze was a huge blunder. While making up for that miss, Intel needs to watch for what's next and move quickly. Launching a pay-TV service just makes the company seem desperate to try anything.
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