Intel's Rumored Set-Top Box is a Cable TV Nightmare
Intel (NASDAQ: INTC) is rumored to be developing a set-top box that will incorporate streaming video and traditional pay-TV services.
The most interesting feature of the new "service" (if you can call it that) could come in the form of DVR-free recording. According to TechCrunch: "Supposedly Intel's technology could allow people to recall and watch any programming aired in the last month on the channels they subscribe to. That means no worrying about scheduling what to record. You could pull up a new show from last night that friends raved about, a sports game you forgot about, or all the recent reruns of a favorite cartoon."
In theory, that feature could be very successful -- but at what cost? Consumers already have several freebie options (Hulu, ABC.com, etc.) and paid options (Hulu Plus or pay-TV on-demand) available. At the same time, TiVo (NASDAQ: TVIO) subscribers pay $14.99 per month or a one-time fee of $499.99, plus the cost of the device. If Intel could eliminate this expense and offer shows and sporting events not featured on Hulu or Comcast (NASDAQ: CMCSA) On Demand, consumers would be very interested in its product.
Intel is unlikely to offer a cheaper option, however. Rather, it will merely sell a different product and service at a different price. In the long run, consumers may end up spending just as much as they used to, if not more.
If Intel provided viewers with an unbeatable set-top box, the higher price might be justifiable. However, Intel faces the same obstacles as everyone else.
Dish Network (NASDAQ: DISH) got into trouble after it gave consumers the power to skip the commercials of recorded TV. How will Intel convince content providers that it should be allowed to archive a month's worth of TV content? In doing so, the value of those commercials may be greatly diminished -- even if they cannot be skipped.
Some production companies and TV networks have been fearful of the digital transition, particularly Hulu. Why would CBS (NYSE: CBS), which has yet to provide Hulu and Netflix (NASDAQ: NFLX) with full licensing deals, allow Intel to come in and record a month's worth of content?
Time Warner's (NYSE: TWX) Turner Broadcasting -- which owns TNT, TBS, CNN, Cartoon Network and other cable networks -- said that it would not make Comcast angry by putting its content online for anyone to view.
These are just a few of the hurdles Intel must overcome if it expects to produce a successful set-top box. When all is said and done, the company must still come up with an excuse for consumers to buy the device.
Investors are only marginally interested in the rumor. Intel is currently up more than one percent. The company is down more than 17 percent year-to-date.
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