Peter Kafka

Recent Posts by Peter Kafka

Intel Can’t Break TV’s Bundles

Lots of people who want to disrupt TV are counting on “over the top” services, which would deliver TV over the Web instead of via traditional cable pipes. But Intel’s struggles show just how difficult that will be.

A Reuters report says Intel is promising programmers some cool new tech, including facial-recognition technology, that will make it easier for networks and advertisers to see exactly who’s watching their stuff.

This might creep the bejesus out of normal folks, who don’t like the idea of their TV watching them. But Intel thinks it will make it easier to get the content it wants for less, because targeted ads could be so much more valuable than the spray-and-pray model the industry uses today.

The real problem: None of the content guys have shown any interest in giving Intel their stuff at a discount. More important: None of them have any interest in breaking their programming bundles, which force consumers to pay for lots of shows/networks they don’t want, in exchange for access to the stuff they do want.

Those bundles are core to today’s TV ecosystem. And the TV guys insist that consumers really don’t want “a la carte” programming, because if they do, the channels/shows they like today will end up costing much, much more.

Disney, for instance, charges TV distributors about $5 for every subscriber that gets ESPN. And, by some estimates, only about 25 percent of cable customers actually watch ESPN on a regular basis. So if you unbundled ESPN, the per-subscriber cost might shoot up to $20 or more, to account for the 75 percent drop in its customer base.

You can argue that a la carte programming is inevitable, along with a big drop in programming fees, as the content guys adjust their costs to account for the new reality. But you’ll have to be very patient to see that happen.

Recall that content guys like Disney are inking seven-year or 10-year deals with distributors like Comcast, which will keep the bundles intact for a long time, tying access to ESPN directly to access to other Disney-owned channels like ABC Family and the Disney channel.

People familiar with Intel’s plans tell me that the company has thought about trying to deal with the bundle problem by simply picking a smaller set of bundles. Last year, for instance, Intel was working with Richard Branson’s Virgin Media, and talking about packages that just didn’t include ESPN or any Disney channels. Presumably there’s a group of TV customers who don’t value sports or kids programming, and who would be willing to pay for TV that didn’t include that stuff, and/or TV that included other stuff they do like.

But the Virgin/Intel partnership is off, and Intel is still trying to figure out how to crack the code on its own. The safe bet — the Ari Emanuel bet — is that they won’t do it anytime soon.

(Image courtesy of Shutterstock/jnumber9)


Latest Video

View all videos »

Search »

I’m a giant vat of creative juices.

— David Pogue on why he’s joining Yahoo