Intel aims to start an Internet-delivered video service that allows customers to choose the channels they want – unlike the current cable, satellite and telco TV distribution systems.
No one can expect the likes of Comcast, DirecTV, Time Warner, or Dish Network to radically changed their entrenched business structure – some 30 years old -- that pushes selling scores of channels (typically some 200 of them) at the same time to all their consumers.
Intel has a big war chest and is ready to spend some $2 billion on TV programming deals. But here's the catch, at least according to reports: Intel wants to pay the same price for all networks – CBS, NBC, ABC, Fox, and their associated cable/broadcast networks. Or at least similar deal points.
The problem is that no two networks – broadcast or cable – are the same. Is CBS worth the exact same price as Fox? Harder still: Can ESPN be compared to Bravo, Discovery, Food Network, Spike or CNN?
ESPN gets just over $5 a month per subscriber from current TV distributors. TNT, USA, and TBS get around $1. Other cable networks get less, through a variety of different pricing configurations, pegged to whatever group deal has been reached by their TV network holding companies.
Confusing the matter further, some reports suggest broadcast stations that run network programming are getting anywhere from 50 cents to a dollar per subscriber per month. The big broadcast networks say that, from a pure viewership model, they and their affiliate stations should get more than anyone – ESPN or otherwise – since they maintain the biggest audiences.
All this is at the root of the a la carte enigma. Somehow Intel does want to play fair. But fair in relation to what?
Then of course, what does the viewer want? An up-and-coming network might want to promote itself. But on the Intel system, where would it do that, especially if viewers don't have that network in their “a la carte” programming package? On the 'home” screen perhaps?
Currently, via local cable avails, competing cable networks can promote on each other's channels. But this is no-no with the broadcast-networks.
What can Intel do about that? Money, of course.
As part of an overall deal, Intel plans to pay 50-75% more to content providers then they currently get in TV distribution deals.
Well, for sure, that's an incentive – especially considering all networks will be working with a lower U.S. TV consumer footprint. Under an a la carte system, all networks would immediately take a hit from lower national advertiser revenues – 30-50% and more.
Keeping the same fattening TV consumption system, dieting on a la carte, or just better TV viewing fitness? Consumers will have it their way.