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Why Intel and Apple Won't Replace Cable TV

Back in February, Intel — known for computer chips, not entertainment — announced that it was developing its own cable-TV-like service, dubbed OnCue, to be introduced by the end of this year. Now, reports in the Wall Street Journal, The New York Times and Variety indicate that Intel has pushed that release date out to 2014 and is looking for someone — anyone — to partner with to keep the service alive. (The short list includes Netflix, Amazon and Samsung.)

It's not surprising that Intel is having a hard time. Aside from the difficulty and high cost of negotiating content deals with networks, Intel is unlikely to offer customers a better price or a better service than they are getting from cable or online TV. 

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That likely also explains why — despite the hype today about Apple hiring cable industry heavyweight Jean-François Mulé — the much-anticipated Apple television service has remained a mythical creature. It's more likely that Mulé will find ways for Apple to play nice with cable companies (for example, integrating cable access into the Apple TV interface) than to compete with them. 

Intel offers nothing new

In many ways, Intel is simply looking to be another cable company by offering live shows from the major networks and "cable" channels, as well as a cloud-based DVR service. How is that going to change anything for customers?

Intel's biggest differentiator is that it will deliver TV over the Internet instead of over cable — which means the service could be worse, with more buffering and pictures that occasionally break up. Netflix does really well and continues to grow in the U.S., but it's still limited (for now, at least) by the number of people who have enough bandwidth to watch its streaming content. 

According to the Federal Communications Commission's latest Broadband Progress Report, released in August 2012, only 38 percent of Americans can get the 3-megabits-per-second broadband speed (even over cable) that Netflix recommends for streaming DVD-quality video, never mind HD streams (which only about a quarter of Americans can manage).

In comparison, about 93 percent of Americans can get cable TV service, according to the National Cable and Telecommunications Association. And for the 7 percent left out of cable service satellite TV may be an option. Both types f service deliver HD quality without buffering or stuttering. An HDTV antenna, which allows you to watch HD-quality broadcasts for free, is also an option. 

Intel does promise an online DVR, but DVRs have been available to pay-TV subscribers for many years. Nonetheless, just half of U.S.  households with cable or satellite have a DVR, and those who do used it watch an average of just 24 minutes of recorded TV per day in the second quarter of this year. That compares to the whopping 4 hours and 19 minutes of live TV per person per day that Americans watch on average, according to Nielsen's latest Cross Media Platform report from September.

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Anyone surprised by the amount of live-TV viewing should consider the national paralysis that gripped the U.S. the past few Sunday nights as people tuned in to the final episodes of "Breaking Bad." The show's finale pulled in 10.3 million live viewers, according to AMC. And don't forget the country's obsession with sports, which is almost invariably a live viewing event (even if it's on a time delay from a sporting event being held halfway around the world).

Meanwhile, viewership of shows "on demand" from the cable company — which is kind of like a cloud DVR that you don't have to remember to set — is up 37 percent since 2008, according to the same Nielsen study. So, those viewers might ask, "Intel (or Apple), what can you do better for me?" Can Intel offer customers a better deal? Not if it wants to make money. The networks have no incentive to make less money than by charging Intel or Apple less than they charge the cable and satellite providers. In fact, they keep squeezing out more money from the providers — the CBS-Time Warner Cable standoff is just the latest example of that. So Intel or Apple would have to either charge subscribers as much as the cable and satellite companies do, or charge less and eat the substantial losses. 

Cord cutters probably won't be impressed

So much for the cable and satellite subscribers, whose numbers, despite the talk of a cord-cutting craze, have barely gone down. From 2008 to 2013, the number of households subscribing to pay TV grew from 98.9 million to 101.7 million, according to market-research firm SNL Kagan. That's a bit less than the increase in the number of households, but hardly a mass exodus. And those who do or consider cord-cutting do it mainly to save money. While online viewing is growing, people still watch more cable or satellite — even in the cherished 18- to 24-year old demographic, and it's about an even split for those ages 25 to 34, according to a survey of 2,548 Americans conducted in July by research firm AltmanVilandrie.

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And Intel TV probably wouldn't even be enticing for those who cord-cut. Intel is promising a better interface, but just 14 percent of respondents in the AltmanVilandrie study gave that as a reason for watching streaming services. The largest chunk, 53 percent, gave as a reason, "I can watch on my own timetable." The next biggest contingent, 43 percent, said, "I can easily get TV shows I want to watch." What those two reasons add up to is binge watching, with the most people — 48 percent — watching Netflix Instant. Only 22 percent said they binge watch on live TV or video on demand from their cable company. If Intel is trying to be like a cable company, it's not the most enticing offering for binge-watching cord-cutters.

None of this continued allegiance to cable and satellite services means that they are great, or that subscribers love them. Could they be better? That's certainly what their own subscribers say again and again in surveys. But the pricing (which an Intel or Apple service isn't likely to change) or the lousy interfaces aren't the biggest complaints. For now, cable is good for some things, and streaming is good for the rest. 

Follow Sean Captain @seancaptain and on Google+. Follow us @tomsguide, on Facebook and on Google+.