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Intel Corporation (INTC)’s New Cable Service Could Cripple Companies Like TiVo Inc. (TIVO) and DirecTV (DTV)

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Intel Corporation (INTC)Intel Corporation (NASDAQ:INTC) is mostly known for its computer chips. But soon, it could be a major force in the cable industry.

The company is hard at work on an Internet-based cable service. When it launches, it could threaten the business of established players like TiVo Inc. (NASDAQ:TIVO) and DirecTV (NASDAQ:DTV).

Intel Media’s foray into the content business

Reports about Intel Corporation (NASDAQ:INTC)’s work have been around for months. But on Monday, a Wall Street Journal article offered more details. Intel Corporation (NASDAQ:INTC) has dedicated 350 employees to the project, and the service is now in its testing phase. The company plans to launch in select markets later this year.

According to the report, Intel’s service essentially offers customers access to the world’s best DVR. Intel Corporation (NASDAQ:INTC) has set up a server farm that will record all TV and keep it for days at a time. Subscribers can then access this content through a set top box.

The exact details remain unknown, but given that it’s being made by a tech giant, the service will probably offer an innovative interface, and ability to access any content directly online.

Pressuring the established players

Of course, this is really nothing new. The established players like Comcast and DirecTV (NASDAQ:DTV) have been offering shows “on demand” for years, and subscribers can watch much of their content by logging onto the companies’ respective websites. Time Warner Cable Inc (NYSE:TWC) even has a Roku app.

But for the most part, these offerings are flawed. As both a DirecTV (NASDAQ:DTV) and HBO subscriber, I can personally testify to the clunkiness of DirecTV’s online interface. Sure, I can watch HBO content through DirecTV (NASDAQ:DTV)’s website if I want, but HBO’s own app (HBO Go) is far superior — it has a better interface, and it’s easier to browse and search for content.

Intel Corporation (NASDAQ:INTC), with a more tech-centered workforce, is likely positioned to deliver the superior web-based experience.

Moreover, the fact that it’s web-based should mean that, in time, it will be available to every Internet subscriber in the US. As it stands, most consumers have limited choices when it comes to their cable provider; Intel would be another option.

Satellite companies and TiVo are exposed

If Intel Corporation (NASDAQ:INTC)’s new service is successful, it should be most damaging to satellite companies and TiVo Inc. (NASDAQ:TIVO).

A Comcast subscriber who wants to switch to Intel will still have to keep paying Comcast for Internet. DirecTV (NASDAQ:DTV) has no such advantage. As I’ve written previously, this makes a company like DirecTV (NASDAQ:DTV) more vulnerable to cord-cutting than the big cable players who, for the most part, also control access to the Internet.

As for TiVo Inc. (NASDAQ:TIVO), the company’s business model is basically predicated on taking advantage of the cable industry’s interface shortcomings. TiVo Inc. (NASDAQ:TIVO)’s DVR might be the most advanced on the market, but that isn’t saying much.

TiVo’s DVR interfaces with web services like Netflix, Inc. (NASDAQ:NFLX) and Hulu, and allows subscribers to better access content on their tablets.

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