Verizon In Advanced Talks to Buy Intel’s Internet TV Unit

Verizon Communications is in “advanced talks” on a deal to acquire Intel Media, which has aborted plans to launch an over-the-top pay TV package, Variety has confirmed.

The deal, if it happens, would signal Verizon’s move to become the first “virtual” subscription TV service in the U.S. Verizon offers a traditional facilities-based TV service through FiOS, with 5.2 million video subscribers. But FiOS covers only a portion of the country — and the telco could seek to leverage its existing FiOS programming deals to challenge competitors outside its own operating regions.

Reps for Verizon and Intel declined to comment.

Word that the telco is near clinching a deal for Intel Media was reported earlier Friday by Bloomberg, which said Verizon could announce a pact as soon as next week. According to a source familiar with the negotiations, talks are ongoing and there is no imminent deal. Verizon’s discussions with Intel about buying the Internet TV business were reported in October by AllThingsD.

Intel had been seeking as much as $500 million for the group, Bloomberg reported last month. It’s not clear how big Verizon’s current offer on the table is, but the telco “may pay less than $200 million” for Intel Media, The Wall Street Journal reported late Friday.

The chip giant spent more than two years developing a set-top box and service that would deliver live and on-demand TV programming over the Internet, under the brand name “OnCue,” in a bid to challenge incumbent cable and satellite TV services. Intel Media has been led by former BBC exec Erik Huggers, and the division staffed up with more than 350 employees, taking over a building on the company’s Santa Clara, Calif., campus.

But Intel has dropped efforts to commercially launch the offering, which it had hoped to debut by the end of 2013, and has been seeking to unload the division.

The high cost of acquiring programming rights and running a consumer-facing pay-TV service appeared to lead Intel to shift gears. CEO Brian Krzanich, who took the top job this spring, has said that the chip company needs to focus on its core business as well as driving into mobile.

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