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Big players looking to break into pay-TV industry

Tuesday, August 06, 2013

Armed with billions in cash and promising advanced features, tech giants are gunning to take on cable, phone and satellite companies by offering pay TV via the web.

They plan to use existing cable, fiber and wireless networks to offer web- based TV in living rooms and on tablets and smartphones.

In the latest sign of change in TV viewing, Google last week introduced Chromecast, a US$35 (HK$273) device that lets mobile-phone and tablet owners watch YouTube and Netflix on their TV sets.

First the companies need content. And broadcast and cable networks are determined not to make the same mistake of the music industry, done in by the economics of digital distribution.

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At stake is the US$100 billion a year in fees the networks share with cable, phone and satellite providers, which charge viewers about US$80 a month for programming bundles.

"TV networks are deathly afraid," said Laura Martin, a Needham & Co analyst in Los Angeles. "That's why they are refusing to unbundle their channels for Silicon Valley companies, which want to offer TV to a new generation of viewers already accustomed to finding shows on the internet."

Today 101 million US households pay for TV. In addition to monthly fees, the TV industry collects US$59 billion a year in ad sales - with most going to network owners like Walt Disney, parent of ESPN and ABC, CBS, Comcast's NBCUniversal, 21st Century Fox and Time Warner.

To obtain their shows, tech companies will have to agree to offer programming bundles and pay a 20 percent premium above what current providers are assessed for packages. Those are the terms Hollywood demanded of telephone companies when they were getting started.

The price may be worth it, as tech companies seek new revenue in the wake of slumping personal computer sales and as they try to cash in on the soaring mobile ads market.

Technology companies have been trying to shake up TV for years with little success. In 2007, Intel introduced Viiv, a PC designed to work with living- room TVs. In 2010, Qualcomm, the largest maker of chips for mobile phones, closed FloTV, a service for small screens, citing a lack of customers.

Intel and Sony are both working on pay-TV products. Intel is developing a set-top box for sale in stores this year, said Eric Free, a vice president and general manager. The product will be sold with a monthly subscription providing live and on-demand entertainment.

Apple is seeking to work with pay- TV providers, at least in the near term, to offer services letting current cable subscribers watch using an Apple device. The firm, however, declined to comment.

Google is again discussing buying streaming rights from Hollywood, according to people with knowledge of the matter, after years of investing in original YouTube channels and faltering with Google TV. The company would still have to address the industry's concerns about piracy.

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