DirecTV CEO Says Intel TV Service Isn’t ‘Very Good Idea’

DirecTV Chief Executive Officer Mike White, who runs the largest U.S. satellite-television provider, criticized Intel Corp. (INTC)’s attempt to create an Internet-based alternative to pay-TV services.

“I don’t think the Intel idea is a very good idea,” White said today at the company’s annual investor day. The main drawback is that it requires customers to get a separate broadband connection, he said, so it’s not a stand-alone service. White also said he wasn’t sure whether an Internet-based approach could handle all the traffic generated by several Netflix-type services.

Intel, the world’s largest chipmaker, has been trying to sell off its streaming-TV business, called OnCue, after management decided it didn’t want to fund the programming needed for the service, according to people familiar with the matter. The company is asking about $500 million for the business, the people said last month. Verizon Communications Inc. (VZ), which offers a TV service called FiOS in some markets, has held talks with Intel about acquiring OnCue, according to the people.

OnCue is designed to provide pay-TV programming over any high-speed Internet connection, making it a threat to cable-TV services that deliver shows over dedicated lines. Intel’s system includes servers, set-top boxes and applications that can stream content to televisions, phones and tablets.

Expanding Rights

OnCue would let Verizon offer a pay-TV service outside its current FiOS footprint. The New York-based company has been asking media companies if a streaming product would require new contracts for programming content, or whether existing FiOS TV agreements could be amended to include the additional rights, the people familiar have said.

White’s remark today represents one of the most public rebukes of the technology, which Intel developed as part of a broader effort to decrease its reliance on personal-computer revenue.

“We’ve developed great technology and we stand by it,” Laura Anderson, a spokeswoman for Santa Clara, California-based Intel, said in response to the comment.

Intel shares rose less than 1 percent to $24.47 at the close in New York today, while DirecTV (DTV) was little changed at $67.02.

Intel backed off of its TV efforts under new CEO Brian Krzanich. He took the reins in May and has focused on other areas, such as getting more chips into mobile devices.

Hulu Bid

DirecTV, meanwhile, expressed interest in acquiring its own streaming TV service earlier this year. The El Segundo, California-based company offered about $1 billion for Hulu LLC, which lets viewers watch TV shows over an Internet connection, according to people with knowledge of the situation. Hulu’s owners decided in July that they didn’t want to sell.

White said today that buying or building a streaming product -- known in the industry as an over-the-top service -- is still a possibility. Acquiring the rights to distribute programming is the biggest challenge for such services, he said. Hulu is co-owned by broadcasters, giving it an inside track to many popular shows.

DirecTV has been holding discussions about over-the-top distribution rights and is “down the path” in those talks, White said.

To contact the reporters on this story: Scott Moritz in New York at smoritz6@bloomberg.net; Ian King in San Francisco at ianking@bloomberg.net

To contact the editor responsible for this story: Nick Turner at nturner7@bloomberg.net

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