Why Intel Corporation (INTC) Taking on Television

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Showing live sporting events is one thing that The Walt Disney Company (NYSE:DIS) has been working on by offering live streaming of its ESPN service to cable customers. Note, however, that it hasn’t simply given this content to cable companies. Customers have to go to an ESPN-branded site to get it. This shows the value of the content, and the difficulty new players are likely to face in gaining access to it.

Why Partner with Intel

Indeed, the issue Intel seems to be facing is getting content. It’s easy to understand why: An industry that is already facing pressure is being asked to partner with a service that is pretty much designed to destroy the current business structure of that industry. Who would sign up for that?

Intel is coming at this with high hopes, but it faces a massive uphill climb if it is going to succeed. If Apple hasn’t been able to pull this off, it is hard to believe that Intel, with absolutely no experience in the space, will. That leaves the question of how bad could it be?

Luckily for Intel, the company is extremely large and can handle a few notable distractions while it continues to work on its core chip business, particularly the effort to shift more toward mobile. In this, the company is similar to Microsoft Corporation (NASDAQ:MSFT) which has had many notable duds in its time, including the ill-fated Zune music player. So, even if Intel fails, it probably won’t be too big an issue for the company. Shareholders, however, would have a right to gripe about wasted money.

Maybe it Works

One thing to remember about Microsoft, however, is that it has made some out of left field bets that have worked out well. Take Xbox, for example. That product wasn’t an instant success, but is now one of the company’s core franchises. Intel has the money to stick around long enough to turn a television product into a success. If the product turns out to be good enough, it might even get the industry behind it, after a time.

So, the risks of failure are there, but probably not notable enough to materially hurt the company. The chance of success is remote, but if the long shot works it could be very profitable. Perhaps, in the end, the risk/reward balance is actually not as bad as it seems.

The article Why This Chipmaker’s Taking on Television originally appeared on Fool.com and is written by Reuben Gregg Brewer.

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