Foreshadowing a new challenge to entrenched cable and satellite providers, Google is one of several technology giants trying to license TV channels for an Internet cable service, according to people with direct knowledge of the company’s efforts.

No deals are imminent. But Google’s recent meetings with major media companies that own channels are a sign of the newfound race to sell cablelike services via the Internet, creating an alternative to the current television packages that 100 million American households buy from companies like Comcast and Time Warner Cable.

Intel is hard at work on one such service and companies like Sony and Microsoft have previously shown interest in the same idea, called an “over the top” service because the channels would ride on top of existing broadband connections. They need support from the channel owners, though, and so far that has been tepid.

Google, which also owns YouTube, the world’s largest online video site, declined to comment on its television interest. But by instigating conversations with channel owners about a service that would compete with the likes of Comcast, the company is taking a different tack than its rival Apple, which has been trying to collaborate with both channel owners and their distributors on a TV offering.

“Google feels the need to beat Apple to the punch,” said one of the people with direct knowledge of the meetings, who like the others interviewed spoke on condition of anonymity.

Apple’s thinking, according to these people, is that any next-generation television service must be set up in partnership with existing distributors, in part for quality assurance reasons. A future Apple service could include a user-friendly interface layered on top of Time Warner Cable or Cablevision’s channel lineup. “Apple’s working within our current ecosystem,” one of the people said.

What Google and Intel, and probably others, have in mind is more disruptive and more difficult. One person involved in the talks with Google cautioned that the company might end up just selling a library of TV shows, the way Netflix, Amazon and Hulu already do. But others said that Google has pitched an easy-to-use subscription service that would stream a bundle of live channels as well as on-demand shows, replacing the cable bundles that most households now purchase.

Google, an advertising company at its core, has tried to make a dent in the television business before. Previous talks with channel owners in 2011 went nowhere. An attempt at an automated TV ad-buying system was shut down last year. Broadband in the meantime has continued to become more popular and more widely available, spurring interest in alternatives to traditional television distribution.

Google’s renewed push was first reported by The Wall Street Journal Tuesday afternoon. Intel is trying to create a similar over-the-top service, but it has run into roadblocks set up by Time Warner Cable and other incumbent television distributors. These include contracts between existing distributors and some channel owners that prohibit the channels from being licensed to new competitors like Intel. An Intel spokesman declined to comment on Tuesday.

Another challenge involves channel owners like the Walt Disney Company and Viacom, who could stand to benefit or suffer greatly from the potential service, depending on how it is developed. Some owners doubt that there is much of a market for cable via the Internet in the first place, and they are content with the three methods of distribution they have today: cable companies like Comcast, the satellite providers DirecTV and Dish Network, and the fiber optic providers Verizon FiOS and ATT U-verse.

But if Intel, Google or another firm succeeds in selling a cablelike bundle, some of those existing distributors would almost certainly start doing the same thing. That would represent a sea change for the cable industry, whose firms have historically stayed with their own regional footprints and avoided direct competition with each other.

One of the reasons DirecTV recently tried, unsuccessfully, to buy Hulu was because the Web site could have helped position the company in an over-the-top marketplace.

One of the country’s smaller cable companies, Cox Communications, is already trying what amounts to this service in Orange County, Calif. There, the company recently started selling a bundle of nearly 100 channels to its customers who have broadband but not cable TV. The company has called it a “small trial,” and it declined to comment on its status on Tuesday.

“We are still early on, results and customer feedback will determine if we proceed with any future plans on this product,” Todd Smith, a Cox spokesman, said.

A cable service delivered via the Internet would most likely have to compete on quality — say, superior features like more space for digital video recording — rather than on price. That is because, as a Government Accountability Office report on the marketplace put it last month, “networks generally offer significant discounts based on the number of subscribers a provider has. Thus, a substantial disadvantage that an entrant has relative to a large provider is that it will likely have higher programming costs, making entry challenging.”

But Google, Intel and the others eyeing the television space are deep-pocketed giants. And they have another thing going for them: in customer satisfaction surveys, they are a lot more popular than the cable guys.

Claire Cain Miller contributed reporting.

Article source: http://www.nytimes.com/2013/07/17/business/media/google-is-said-to-mull-internet-cable-service.html?partner=rss&emc=rss