Tuesday, March 27, 2012

How can Intel success on virtual TV Biz?

 Intel recently released their plan to go into virtual cable TV business.
But their new business has many of the negative perspection than the positive.

1. Possible poor contents line up
 The contents providers like Paramount, one of major studios in U.S. are strongly tied to the current cable TV operators like Comcast. It isn't difficult to get the situation that Comcast could pressurize those contents providers having no selling their contents to Intel or unfavoriable condition on the contents sourcing.

 Therefore Intel might not get enough contents, and sourcing cost of them would be higher.

2. Lack of experience in the high risked contents business.
 Contents is one of high risk business. Only one movie out of 10 is successful and others are nearly being foggotten, 10% success rate. Main competiveness inTV biz is having full of inspiration of contents Biz from the past experience.

 Intel will hire some experts on this industry, but Intel's corporate culture and management decision systems are based on the IT, manufacturer company. This culture is completely different to that of the contents business company.  Only a few experts from the external could not change Intel to the contents TV business company.

3. Profitability from the burden of Set-Top-Box investments
 Cable TV business requires to install set-top-box into every subscriber, and this uses huge investments.
Asumming unit price of set-top-box is $100, possible subscribers 10M, then total investments on this should be 10B. But this investments is only part of it, and Intel needs to do head-end equipments, contents sourcing, etc.
 This kind of set-top-box business has big entry barriers to the new comer.  I believe Intel would be difficult to get profitability so early.

4. Escalating net neutrality issues.
 Intel doesn't have their own network while virtual TV business should consume large amount of network traffic bandwidth. If Intel only uses ISP's network for this business, it can be a kind of free-riding, and ISP wouldn't be happy to this situation.
 American ISP has traffic control scheme per subscriber, and they would block Intel's TV traffic if Intel doesn't pay their traffic usage to ISP accordingly. This is an example of net neutrality issue that FCC is still working on it, and Intel case would ignite net neutrality debating/issue nationwidely or worldwidely.

To consider above, Intel's TV business would be very tough. Therefore quick and timely reaction under fully understanding of TV contents business is only solution on this issue.

Good luck in Intel's new business !  

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