IAC to Take on Cable, Satellite Operators with Video Streaming Service
IAC Chairman Barry Diller

IAC/Interactive (IAC) Chairman Barry Diller, who upended the media landscape in 1986 when he created Fox Broadcasting to battle the existing three TV networks, could soon enter the race to take on cable operators by creating an over-the-top streaming video service.

Diller's IAC, a collection of Internet companies that includes dating site Match.com and the Daily Beast news site, on May 2 acquired VHX, whose technology provides back-end services for content owners offering video via subscription. IAC is combining VHX with Vimeo, its own service for content creators to show videos to a streaming audience that IAC estimates at 280 million users.

What exactly Diller's troops intend to do with the combined entities so far is unclear. In a letter to shareholders, CEO Joey Levin said IAC likely won't pay large amounts of money for content to take on large over-the-top service providers such as Netflix (NFLX) , Amazon.com (AMZN) and Hulu that are creating original content to differentiate themselves.

"We don't intend to get into the multibillion-dollar war on content," Levin wrote. "Our efforts here will be targeted, with the goal of building out the marketplace that enables creators to access Vimeo's audience."

Over the next year, IAC will "recruit and curate the right programming and creators" as well as "build out the consumer experience," he wrote, while alluding to a plan that could siphon viewers away from cable or satellite operators by offering a slimmer bundle of targeted channels.

"The paid video market in the U.S. is about $120 billion -- $100 billion of which is subscription to a cable or satellite bundle that my children will barely use in their lifetime," Levin said in the letter.

An IAC spokeswoman did not return calls seeking further comment.

One indication that Diller may be thinking about adding mainstream content aimed at TV viewers is his hiring of Garth Ancier, a former top programmer for NBC and The WB television network, as a consultant to Vimeo and IAC executives.

Ancier also was Diller's top programming executive when Fox took on CBS (CBS) , ABC and NBC to become the fourth network, and in 2013 he advised Intel (INTC) on its failed attempt to take on cable operators with its own over-the-top video service.

Ancier would not comment for this article.

Diller has tried to take on cable and satellite operators with a slim bundle in the past. In 2012, IAC backed Aereo, a subscription service that offered live and time-shifted TV programming delivered to Internet-connected devices through over-the-air antennas. The service, which charged $1 a day for 28 channels, built to about 80,000 subscribers in New York and Boston before suspending its service in 2014 after the U.S. Supreme Court ruled it violated copyright laws.

Aereo filed for Chapter 11 protection on Nov. 20, 2014, and subsequently sold its assets for $1.55 million in three separate transactions.

IAC shares fell 10 cents Monday, or 0.18%, to $54.24.

This article is commentary by an independent contributor. At the time of publication, the author held a position in CBS.

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