Chipmakers seeks bedroom eyes

Digital distribution

During the height of the PC revolution, Intel was a powerful behind-the-scenes force, consumed by things like Moore’s Law and whatever enterprise IT solution Bill Gates had on his mind.

In those halcyon days, it would have been unimaginable to see marketers for the chipmaking giant at a New York club, plugging the results of a whimsical study that reveals how people consume media in bed.

But B.E.D. — on 27th St., between 10th and 11th avenues — is just where they’ll be tonight, as Intel officials try to steer the brave new world of home media technology in their direction.

The private event, in which Intel will showcase new home entertainment-related gadgets and software, is part of the company’s larger marketing push to showcase its Viiv technology (rhymes with “five”).

Introduced in January, Viiv is a technology standard for chipsets, software, digital-rights management and network cards. It aims to connect content stored on a PCs with entertainment devices around the home, notably the living room — or bedroom — television. For example, a Viiv-enabled PC would be able to share Viiv-encoded content with a Viiv-enabled set-top box connected to the TV.

The ability to download video and watch it in the living room opens the door for digital distribution of movies and TV shows. Intel hopes to see an industry full of Viiv-supporting devices that would enable such a world.

“As more and more people want to consume video on their PCs, they need better and better PCs to do that,” says Kevin Corbett, VP of Intel’s Digital Home Group and G.M. of its Content Services Group. “It’s extremely important to us — and we think very strategic to us — to not only have it on our PCs, but to be able to connect it to the TV.”

The push for Viiv comes at a crucial time for Santa Clara, Calif.-based Intel. The 800-pound gorilla of the microprocessor business has lost significant market share in recent years to rival AMD, and PC sales aren’t growing nearly as fast as they were a decade ago.

Meanwhile, despite record revenue of $39 billion in 2005, strategic stumbles and canceled products have led Intel’s stock to tumble more than 20% this year alone.

A restructuring plan announced Sept. 5 will cut up to $3 billion in operating costs and eliminate more than 10,000 jobs.

“Viiv represents a business expansion opportunity for them, giving consumers potentially a reason to buy a second PC that would be placed next to their TV or give consumers a reason to upgrade their PC earlier,” says Ross Rubin, director of industry analysis for the NPD Group.

To connect Viiv with digital home entertainment in the minds of consumers, Intel has formed more than 100 strategic partnerships with content producers around the world.

NBC and AOL recently signed on to use Viiv in delivering content to PCs, joining companies like Yahoo! and DirecTV, which will add Viiv technology to its HD DVR boxes.

Intel has actively promoted the benefits of broadband distribution of movies, teaming up with Internet-based video-on-demand services Movielink, CinemaNow and ClickStar to enable the legal downloading of titles to rent or own.

Despite its partnerships, Intel is sticking with making processors and is staying away from the production, licensing and selling of content.

“The key difference you’ll see in our strategy versus a Microsoft Zune strategy or an Apple strategy is, fundamentally, we’re going to stay with the Intel playbook, which is stay open,” Corbett says. “We think open always wins, but open sometimes takes a little longer, so it’s a good thing we’ve got a long head start here.”

Rubin says Intel’s open architecture is an advantage over a closed system like Apple’s iTunes, which can only be accessed through Apple software and works only with the company’s iPod music players.

Rubin says consumer awareness of this kind of technology is limited, but he expects the release next year of Microsoft’s long-awaited Windows Vista operating system will make the advantages of connecting a PC to the television more apparent.

“There’s a lot of competition, particularly as set-top boxes will be capable of home networking,” Rubin says.

Apple is one such competitor, having announced Sept. 12 a product — code-named iTV — that will sell for about $300 and let consumers watch movies and TV shows bought from iTunes on flat-screen televisions.

Corbett sees Apple’s approach merely as confirmation that Intel is on the right track.

“If they were following a different strategy, I think that might have been a bigger issue,” he says.

Rubin says adoption rates for the digital home will be incremental for the foreseeable future, but it remains a vital growth sector for Intel.

“It’s an area that they need to continue to focus on,” he says.

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