The content obstacle
You don’t have to be an industry expert to notice the number of tech giants looking at the broadcast world with Pound signs lighting up their eyes. Apple, Microsoft and Google have all entered the market with some great ideas and long track records of producing successful technology products. These newcomers believe they can play an important role in the £65 billion cable TV ecosystem.
One of the latest newbies with a tech background is Intel Media. As the famous chip maker moves into unfamiliar territory, it is the negotiations with content providers that are likely to make or break the brand.
The man chosen to front this new venture is Erik Huggers, who was an integral part of the launch and subsequent success of BBC iPlayer. In order to bring vital industry relationships and nous to the table, he has put together a team of veteran TV specialists, which is being operated as a largely independent unit with offices separate from the rest of Intel. Huggers has pointed out that Microsoft did the same thing when entering the gaming market with Xbox.
In February Intel Media announced plans to launch a paid internet video service and an accompanying set-top box later this year. Through this system the company aims to offer smaller bundles of content than those offered by traditional pay TV providers. The idea is to make the viewing experience more tailored and avoid customers paying for unwanted channels, which is a common complaint.
While the industry generally regards ‘a la carte’ programming as difficult to achieve, there is still scope for improvement in this area and that is something Intel Media will look to take advantage of. However, this will be impossible to achieve without developing great relationships with content providers. Intel’s aim to build this rapport has been evident from the outset, as it took the unprecedented step to approach providers before the service was even conceived. Content providers were invited to give their input on the service’s features rather than being consulted after the product was complete. This was a wise move and I expect other companies will look to adopt a similar process when entering this increasingly cluttered market.
As a result, Intel Media plans to offer features that go further than products currently offered by competitors such as Apple, Amazon and Netflix. The standout differences are the combination of live programming as well as on-demand content and the technical capabilities of the set-top box. For instance, the box includes a camera that could be used to automatically steer content and ads toward specific individuals using facial recognition technology. The popularity of unique features like this will, no doubt, go a long way in deciding how successful the product will be.
As with most new business ideas, Intel has received a mixed reaction from the industry to date. Most sceptics see the biggest challenge as convincing content providers to agree to terms that are attractive enough to make its service viable. Some say that Intel is not going to offer anything that differentiates itself enough on service or price to get the right deals done. On the other hand, there is also the argument that if companies like Intel can help boost demand for video services, there is little reason why content providers shouldn't embrace it.
Many will view the impressive technical attributes of the new product as a statement of intent. The ‘dream team’ of broadcast experts assembled at Intel Media are obviously very keen to harness the company’s expertise in this area as well as develop its content capabilities. By achieving the right blend of innovative technology and compelling content, deeper and more relevant relationships can be developed with audiences along with greater loyalty and ultimately, greater revenue. Companies like Intel Media may be new to the media industry, but they are very much aware of (and adept at harnessing) the potential opportunities afforded by technology and data. As indeed are the traditional broadcasters, platforms and content owners. You only have to look at the time, money and energy some media giants like Channel 4 have invested in technology over recent months to see they mean business.
The content challenges facing newcomers wanting to break through existing relationships between major players in the market have been well documented and it’s no secret that large cable and satellite distributors are trying to make it very difficult for Intel to succeed. A variety of methods are being used to pressure cable channels, with whom they have lucrative long-term contracts, not to sign any deals with Intel, therefore preserving the status quo.
From what I can tell, these tactics are yet to deter Intel, as the company is prepared to pay more than existing distributors for channels. It also has the US government on its side, which is investigating the anti-competitive measures included in contracts that expressly prohibit channels to be sold to an internet distributor like Intel. A spokesman for the Justice Department said that contracts referencing rivals are harmful to the competition. However, even with this support, it would be fair to say that Intel has not received the warmest of welcomes so far.
Stella Medlicott, Chief Marketing Officer, Red Bee Media