Intel’s Virtual TV Into Focus

Intel, the world’s largest chipmaker, has kept its strategy to launch a slimmed down cable TV service under wraps as the tech giant risks getting into a completely new line of business.

According to five sources who have been negotiating with Intel for months, the company is emphasizing a set-top box employing Intel technology that can distinguish who is watching, potentially allowing Intel to target advertising.

The set-top box pitched by Intel doesn’t identify specific people, but it could provide general data about viewers’ gender or whether they’re adults or children to help target advertising, two sources said.

Intel’s plans put it in the middle of Silicon Valley’s battle for the living room. Heavyweights such as Apple, Amazon and Google believe the $100 billion U.S. cable television ecosystem – dominated by major distributors such as Comcast and DirecTV Group and program makers like Walt Disney Co and Time Warner Inc. – is ripe for disruption for reasons ranging from shifting viewer habits to ever-increasing programming costs.

While none of these companies have so far been able to make major inroads, Intel thinks it can build a better set-top box and over-the-top subscription service to deliver TV content to consumers, even though the initiative catapults it into virgin market territory. A successful TV service showcasing Intel technology could be a big step toward making its chips prevalent in more living room devices.

“If they can create a virtual network and it incorporates proprietary Intel technology, they could certainly bring something different to the subscription TV model.” said JMP analyst Alex Gauna to Reuters.

Intel’s offering aims to exploit one of the s major issues: the reliability, or lack thereof, of Nielsen ratings data on audiences. Nielsen has long been the dominant provider of TV ratings, but the accuracy of its data has come under attack by some network programmers, who argue that its polling system of 50,000 homes is antiquated for the digital age.

For its part, Intel claims that the new interactive features in its set-top box would add greater value to TV advertising and help offset reduced revenue from licensing fees for network owners.

“They’ve told us the technology is going to be so much more interactive with ads that you can make more money. But it’s just a little unproven,” said one executive who has been involved in the talks.