Intel-i-gent Content
Chipmaker is quietly positioning itself to be a key player in online entertainment
December 6,2000
theneteconomy.com
By Paul Coe Clark III
Shareholders in Excalibur will meet in New York City on Dec. 21 to vote on a merger that will link their fate to one of the biggest names in the hard-tech industry. If, as expected, they approve the deal, their company will become part of Convera Corp, tied to the hip with chipmaking giant Intel.
The creation of Convera is only the most recent sign that Intel is putting together assets it hopes will give it a major footprint in the nascent online-video market. That market is now hampered by the bandwidth bottleneck at the access end of the network, but is expected to surge as competing broadband technologies increase in penetration.
If the deal goes through, Intel will merge the three Internet businesses that make up its Interactive Media Services division into Convera. Excalibur, which makes video editing, indexing and retrieval software for online publishing, will fold its entire business into Convera.
In addition to its division, Intel will contribute $150 million in exchange for 60 percent of Convera's stock. It will only have 49 percent of the voting stock of the company, however. Excalibur's stockholders will get one Convera share for each share they hold in Excalibur, holding 40 percent of the new company after closing.
Excalibur has about 15 million shares outstanding. At its current price, about $24, it has a market cap of $357 million.
The potential market for the business is huge, although technical, legal and business-model obstacles make the path to creating and capturing that market uncertain. Intel is targeting sports leagues, media and entertainment companies and industry players who need online video content for training and other purposes.
Intel and Excalibur executives say compatible business models and technologies do not yet exist for one company to enable the distribution of branded, valuable content over the Internet. They hope to solve that problem by combining Excalibur's software, which allows the creation of media archives, with Intel's content-protection technology.
Like other content players, Intel and Excalibur are looking at the huge reservoir of content, such as television programs, movies, sports highlights and old newsreels, that have not been available online, primarily because copyright holders have been afraid to release the content digitally and because a clear business model did not exist.
Copyright holders are terrified of digital piracy, having taken online-music trading of the Napster kind as a warning. Like music studios, movie studios are hoping for the emergence of secure transmission technologies.
Intel is working in that arena, too. In 1999, it created PassEdge, a subsidiary to turn the security research of its Intel Architecture Labs into content-protection products. PassEdge has developed software-based digital-rights management products to address the encryption, rights management, account management and billing problems that have hamstrung the online-video market. |
