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Verizon Makes Play For Intel Media’s OTT TV Assets

Verizon Plans To Integrate ‘OnCue’ With Its Own FiOS TV Platform, Speed IP Video Transition 1/21/2014 8:26 AM Eastern

As anticipated, Verizon Communications has agreed to purchase the assets of Intel Media, the division of the chipmaker that was developing an ambitious “virtual” subscription video service that would be delivered over-the-top via broadband connections.

Financial terms were not disclosed, but Verizon said it will make employment offers to “substantially all” of the 350-person Intel Media unit, which will continue to be based in Santa Clara and be led by its current management team, which includes Erik Huggers, the corporate vice president and general manager of Intel Media.

Intel Media had reportedly been seeking about $500 million for the assets that were to power a service to be called OnCue, that was originally slated to debut late last year. Bloomberg reported that Verizon paid less than $200 million for Intel Media's goods. Last November, a person familiar with the negotions said Intel's lofty desired price had been a sticking point, noting that Verizon would consider paying a figure that is “definitely below $300 million.”

Verizon said the acquisition, expected to close early in the first quarter of 2014, 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.”

It does not appear that Verizon intends to use the OnCue assets to market subscription video services outside its own footprint, at least not right away. Instead, Verizon said expects to integrate IP-based TV services with its FiOS video platform in order to “further differentiate FiOS from traditional cable TV offerings and to reduce ongoing deployment costs.”

In the weeks preceding the deal, sources familiar with Verizon’s interest in OnCue told Multichannel News that the telco’s initial plan was to use those assets to accelerate its IPTV upgrade plans and rapidly establish an equivalent to X1, Comcast’s new cloud-based platform.

Verizon also said the resulting integration of the OnCue assets enhance the discovery, search and interactivity on the TV as well as to mobile, connected devices. Further, the telco said it will weave the Intel Media platform with Verizon Wireless’s 4G LTE network.

“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,” said Verizon chairman and CEO Lowell McAdam, in a statement. “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.”

“We're incredibly proud of what we've achieved,” added Huggers. “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.”

The purchase of Intel Media’s assets marks the latest in a string of cloud-focused acquisitions by Verizon as the telco looks to flesh out its multiscreen video architecture. Last month, Verizon reached a deal to acquire privately held content delivery network company EdgeCast, which is being integrated with Verizon Digital Media Services (VDMS), a unit that’s focused on cloud-based video service delivery. Just weeks before, VDMS snapped up upLynk, a startup founded in 2012 that provides Verizon a framework that aims to simplify and streamline the process of uploading, encoding and inserting ads into TV Everywhere services. upLynk has been powering the suite of Watch Disney apps, as well as Watch ABC.

Intel’s Pull Back

Before putting the OnCue assets on the block, Intel Media had designs on attacking a saturated pay-TV market with a broadband-delivered video subscription service outfitted with “smarter bundles” that would appeal to younger, connected consumers.

Intel Media’s original plan was to launch services by the end of 2013, but those plans came crashing down last fall as rumors swirled that Intel had put the assets on the block after new CEO Brian Krzanich had soured on the idea.  

The reasons why Intel Media pulled back have varied. While some sources indicated that the company had trouble landing enough carriage deals and the rights to cobble together a compelling service, multiple sources familiar with OnCue’s plans said Intel Media was indeed successful in putting distribution deals place, but then refused to sign them over fears that subscriber milestones and other commitments required by those contracts proved too steep.  

Earlier this month, Intel CEO Brian Krzanich acknowledged in an interview with Re/code that his company lacked the scale to move ahead on a pay-TV service on its own. “When you go and play with the content guys, it’s all about volume. And we come at it with no background, no experience, no volume,” he told the publication.

“Intel Media's over-the-top TV products are truly innovative and under Verizon's ownership have the potential to change how people interact with content. 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,” Krzanich said, in a statement issued Tuesday. “This sale also enables Intel to further align our focus and resources around advancing our broad computing product portfolio in segments ranging from the Internet-of-Things to data centers.”

September