With Verizon having confirmed that it’s buying out Intel Media, the unit the US chipmaker set up under former BBC digital exec Erik Huggers, Jonathan Webdale explores what it means for each party.

Erik Huggers

Confirmation came last week that US communications giant Verizon has reached a deal to acquire Intel Media – or rather the assets of a division the chipmaker set up to take it into the TV business but which never realised its ambitions.

Verizon, a company with 35 million subscribers (101.2 million customers when multiple accounts and prepay users are tallied), has been an active player in the TV space for almost a decade now. The firm launched its FiOS TV service in Texas in 2005. But so far it’s only managed to sign 5.2 million households out of a total of 18.3 million within reach of its fibre optic network. Even if the company were to persuade the outstanding 13.1 million, that still leaves around 100 million US households beyond its footprint.

Hence the reason Verizon is purchasing Intel Media and its OnCue Cloud TV service, developed under former BBC digital chief Erik Huggers. His appointment at the company three years ago was a clear signal of intent.

Rumours of Intel’s plans to set itself up as a ‘virtual cable operator’ began percolating in the spring of 2012, but in under 12 months there was already speculation that the initiative was running into difficulties.

Perhaps in an effort to get things back on track, Huggers finally went public on the matter in February last year.

He said there was “very broad support” for Intel Media within the wider company but that was before Brian Krzanich took over from Paul Otellini as CEO in May.

Krzanich cooled expectations soon after his arrival, adopting a “cautious approach”  to the scheme.

With Huggers having pledged to launch the service – branded internally as OnCue – by the end of 2013, there were further signs that things had gone awry when reports began surfacing in October that Intel was close to selling the division to Verizon.

Brian Krzanich

The same month, Huggers was said to have thrown his hat into the ring to be considered for the top spot at Hulu.

The exec had already complained that programme licensing was proving problematic for Intel Media. “We’re working with the entire industry to figure out how to get proper television,” Huggers said, adding that making the consumer box wasn’t nearly as difficult as sorting out the content.

By November, sale speculation over Intel Media and OnCue was mounting with Liberty Global the latest to be linked to a potential buy-out.

Still, despite apparent interest from multiple parties, a rumoured US$500m price tag seemingly proved too rich for anyone’s blood and in the end Verizion reportedly ended up paying around US$200m.

Going public on his own lack of enthusiasm for sustaining OnCue in-house prior to confirming the deal, Krzanich said at the start of 2014: “When you go and play with the content guys, it’s all about volume. And we come at it with no background, no experience, no volume.”

Huggers got all the credit for turning the BBC iPlayer into a success story but it was his predecessor, Ashley Highfield, who waded through treacle to put in place the programme rights deals that made catch-up TV possible at all.

Verizon already has extensive video content relationships, fixed and wireless delivery networks, and customer relationships in both the home and on mobile,” said chairman and CEO Lowell McAdam of the Intel Media deal, alluding to the advantage the firm has in programme rights negotiations thanks to its FiOS TV legacy, and more recently the launch of Redbox Instant by Verizon last year – billed in some quarters as a ‘Netflix killer.’

Verizon said that as part of the OnCue deal it will “make employment offers to substantially all of the approximately 350-person Intel unit, which will continue to be based in Santa Clara and be led by its current management team.”

This will mean Huggers working either in partnership or competition with Redbox Instant CEO Shawn Strickland, the one-time VP of FiOS.

For Verizon, it means “a chance to finally break free from the chains of its FiOS footprint and market its TV service everywhere.”