Intel Corp. (INTC) is making progress in talks with Time Warner Inc. (TWX), NBC Universal and Viacom Inc. (VIAB) to obtain TV shows and films for a first-of-its kind online pay-TV service, according to people with knowledge of the situation.
Intel, the world’s largest chipmaker, is negotiating financial terms with the companies, according to the people, who sought anonymity because the talks are private. The media companies have signed off on the broad outlines of the proposed service, they said, with some aspects still to be settled. Other network owners aren’t as far along, the people said.
Networks such as Time Warner’s CNN, NBC’s USA Network and Viacom’s MTV would give Intel critical mass to offer consumers an alternative to established pay-TV services. Using its own set-top box, Intel plans to offer an online product this year, Erik Huggers, Intel’s vice president for media, said last month. That would represent new competition for incumbent operators like Comcast Corp. (CMCSA) and DirecTV. (DTV)
Intel is betting it can create a more flexible service, delivered through consumers’ broadband accounts, that gives subscribers more choices over the channels they receive and offers an easier-to-use electronic programming guide, Huggers said. The service would offer live channels and on-demand programming.
The chipmaker is about to begin financial negotiations with News Corp. (NWSA), owner of the Fox film and TV businesses, two people said. Discussions with Walt Disney Co. (DIS) and CBS Corp. (CBS) are at a more preliminary stage, according to the people.
Media companies gain a deep-pocketed customer that will probably pay more initially for the content than existing cable and satellite-TV systems, David Bank, an analyst at RBC Capital in New York, said in an e-mail.
“It’s great” for media companies, Bank said. “Intel will have to pay a premium as the new kid on the block.”
Jon Carvill, spokesman for Santa Clara, California-based Intel, declined to comment.
Intel added 2.9 percent to $21.77 at the close in New York. Time Warner, based in New York, advanced 0.7 percent to $56.91, while Viacom, also in New York, was little changed at $61.34. NBC’s parent, Philadelphia-based Comcast, slipped 0.6 percent to $41.47.
Leslie Moonves, chief executive officer of New York-based CBS, said on a Feb. 14 earnings call that his company is having conversations with Intel. Time Warner CEO Jeff Bewkes said he would consider providing content to Internet pay-TV services like the one proposed by Intel.
“Not just Time Warner, but all of us have to look at these new distribution methods and whether they’re viable,” Bewkes said March 4 at an investor conference. “No one has come along with that yet, and we’d look at it.”
Intel is seeking access to live television, a library of on-demand shows and rights for a cloud-based digital video recorder, the people said. Customers would receive programming on TV sets, computers and mobile devices, Huggers said.
The push into the media business is part of Intel’s effort to lessen its dependence on the personal-computer market, which is predicted to decline for a second straight year in 2013.