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Surprisingly, Intel is not just making hardware; they're reportedly wheeling and dealing in Hollywood to ink deals with studios that would enable Intel to "unbundle" shows from their networks, so that people could order TV shows without subscribing to a cable package.
One report says Intel will roll out the service city-by-city slowly over time in order to make these deals. They'll start with small markets, and demonstrate the business viability of their model.
That model may include facial recognition technology to essentially determine demographic information about viewers, including age and gender so that ads can be more narrowly targeted.
It may also include technologies like high-speed video downloading capability, huge-capacity DVR storage, video-conferencing and many others.
It seems unlikely to me that Intel will be able to pull off the Hollywood deals, and it's amazing that they're even trying.
The Intel Media team, as it's called, has already been working on the project for six months and has spent $100 million developing their ideas. The team is staffed by technology superstars from Apple, Jawbone and others.
There are three notable things about this news.
First, it means that Intel is joining the ranks of major technology companies that have decided to compete directly against its own partners. Others driving this trend include Google, which bought Motorola to compete against its Android handset partners, and Microsoft, which launched the Surface tablets to compete against its OEM PC partners.
Interestingly, Google and Microsoft are two of the main partners Intel is competing against with its TV initiative. Apple is the other.
Google already ships its Google TV smart TV product inside major-label flat-screen TVs from the likes of Sony and LG. And Microsoft already ships its Xbox gaming system, which is evolving rapidly into a smart TV and living room system.
And, of course, Apple is reportedly working on an iTV living room system.
Although Intel partners with Microsoft and Apple on PCs, the company is actually one of the core partners with Google on its directly competitive Google TV product.
Second, it means that Intel is aggressively re-entering the consumer market as a branded product maker, rather than a component supplier.
Note that Intel has sold consumer products before. In 2006 and 2007, the company pushed a media PC concept called Viiv, which went nowhere.
And third, it probably means that some major player -- almost certainly Apple -- is developing a smart TV system that currently does not include plans for Intel inside.
If Intel was brought in as a partner by Google, Microsoft and Apple, it seems unlikely that Intel would do this.
Why is Intel doing this?
To oversimplify, the post-PC world has not been kind to Intel.
PCs, where Intel has a commanding position, are on the decline. Smartphones and tablets, where Intel is not dominant, are on the increase. So the world of computing, for lack of a better term, will slip away from Intel despite its unequaled design and manufacturing prowess, unless the company takes aggressive action.
Meanwhile, the so-called living room systems, which means TV computers that also control home automation and connect to game systems and other devices, are expected to become popular and widespread.
However, the idea that Intel actually believes it can beat Google TV, Xbox and iTV in the consumer market -- that it can out-innovate Google, out-sell Microsoft and out-consumer Apple -- defies reason.
I think it's a lot more likely that Intel is working on living room and smart TV to accomplish four things.
Intel's four goals appear to be:
1. Real-world R&D.
By building its own living room system, Intel hopes to develop a better understanding of which technologies work and which don't, and also patent some good methods for this approach to computing.
For example, is voice-command a good interface for TV? Should home security systems be built into the TV? Can Internet-based social interaction be elegantly built into the TV-watching experience?
2. Earn a place at the table.
With good technology and even a little market share, Intel will be in a better position to convince the other players to integrate Intel chips into their offerings. One scenario is partnership -- another major player, or several, combine Intel IP with their own to ship a joint solution. The other scenario is a deal in which Intel's chips are used by whichever company dominates in exchange for Intel exiting the market.
3. Gain advantages in mobile.
What Intel really wants most of all is to become the dominant processor company in phones and tablets. These mobile devices will be tightly integrated with smart TV and living room systems in the future. Intel's initiative will help the company develop chips that are optimized for high-speed wireless interaction between mobile devices and living room systems.
4. Influence the industry.
Intel probably disagrees with the general direction other players are going in, and wants to influence the direction of the entire industry. As it learned from mobile, companies copy each other. And the best general approaches usually win.
By developing microprocessor-heavy smart TV and living room ideas in its system, Intel is hoping that the entire industry goes in the direction of heavy processing power like the PC industry rather than low-cost processing like the mobile industry.
Intel's surprising entry into the smart TV and living room market is part of a larger initiative at Intel to inform the world that the post-PC world has Intel inside, just like the PC world did.