Verizon has acquired the assets of the Intel OnCue Cloud TV platform and is offering to employ most of the 350 staff of the Intel Media division. Intel tried and failed to bring its online television platform to market. Verizon now intends to use the technology to extend its own services. Verizon said the transaction will accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered “over the top” to any device.
The Intel Media team had been working on its television project since late 2011. The service had been tested with employees and some of those that used it have claimed it was impressive.
However, Intel has little experience with consumer products and even less dealing with media companies. When Brian Krzanich stepped up as chief executive of Intel in May 2013, replacing Paul Otellini, he was cautious about the prospects for the company in launching a television service.
“We believe we have a great user interface and the compression-decompression technology is fantastic,” he told Reuters in June 2013. “But in the end, if we want to provide that service it comes down to content. We are not big content players,”
Intel began looking to sell the business, initially asking for a billion dollars, which dropped to half a billion. Terms of the Verizon transaction were not disclosed but the final figure is likely to be a fraction of that, reportedly less than $200 million. In any case, it is not a huge investment for Verizon, which reported revenues of $120 billion for 2013.
In a joint statement with Verizon, the Intel chief executive conceded: “The critical factor in gaining efficient access to content is based on your ability to scale quickly in subscribers and end users, which is why selling these assets to Verizon makes perfect sense, with its millions of FiOS network and wireless customers.”
Erik Huggers, the corporate vice president and general manager of Intel Media, said: “We’re incredibly proud of what we’ve achieved. Intel provided us with the technological know-how and resources to develop products and services that will fundamentally change the way we experience TV, and now Verizon gives us access to the marketplace and the ability to scale. It’s the next logical step, and we’re excited about the road ahead.”
Lowell McAdam, the Verizon chairman and chief executive, said: “The OnCue platform and team will help Verizon bring next-generation video services to audiences who increasingly expect to view content when, where and how they want it.”
“Verizon already has extensive video content relationships, fixed and wireless delivery networks, and customer relationships in both the home and on mobile. This transaction provides us with the capabilities to build a powerful, capitally efficient engine for future growth and innovation. We will have the opportunity to enhance, expand, accelerate and integrate our delivery of video products and services to better serve audiences on a wide array of devices.”
Verizon announced its agreement to acquire of the Intel Media business on the day it reported its quarterly figures. Verizon now has 5.3 million video subscribers, which is 35% penetration of its fibre footprint, which passes 18.6 million premises in the United States, of which 15 million homes could potentially receive FiOS video services.
The Verizon FiOS TV service is unusual in that it is delivered over a fibre-optic network in a similar way to traditional cable television services. Verizon was initially sceptical about IPTV and instead adopted a more conventional architecture that has more in common with conventional cable television. So all the available channels are transmitted over a passive optical network, modulated on a single wavelength in the infrared spectrum. This means Verizon faces similar challenges to conventional cable television services when it comes to delivering services to multiple screens in and outside the home.
Verizon expects to integrate IP-based TV services with FiOS video and enable search and discovery, interactivity and cross-screen use across the Verizon 4G wireless network.
In a conference call with analysts, Fran Shammo, the chief finance officer of Verizon, said that as far as the OnCue acquisition was concerned the focus is “to accelerate the availability of the next-generation IP video service which we will integrate into the FiOS video service.”
“What we are trying to do is differentiate this even more so with fibre to the home versus others with the TV offerings and reducing the deployment costs.” She added that this would be accelerated by buying rather than building the IPTV technology. As far as going over the top is concerned, she said “we are positioning ourselves strategically to be in a position to competitively compete in mobile and video.”
Verizon emphasises that it is not going to build out its fibre network any further for the moment. The focus is on its LTE mobile network, which boasts broader coverage than its competitors across the United States.
In late 2013, Verizon also announced an agreement to acquire EdgeCast, which provides content delivery networks. Earlier in the year it announced the acquisition of upLynk, which provides uploading and encoding services for live and on-demand video.
Verizon could potentially combine these assets to extend television and video services beyond the footprint of its own fibre network, but that would mean relying on direct competitors to deliver its services, which seems problematic.
More likely, it seems that Verizon could use these acquisitions to create a next-generation multiscreen cloud-based service for its existing video customers and concentrate on growing its video customer base in its existing markets.
Beyond that, Verizon could conceivably offer a national video service over its mobile network.
At the very least, Verizon has seen off a potential new entrant in the television market and prevented competitors from using the technology.
Meanwhile, others are still expected to launch over the top television and video services. Sony is due to begin testing a service in the United States later in 2014, as announced at the International CES show. Amazon has been reported to be considering launching a television service to complement its online video offering, although it has specifically countered the reports, saying it is not looking to licence television channels or launch a pay-television service.