Adding to an earlier report, the Wall Street Journal today says that chip giant Intel’s TV initiative isn’t nearly ready for primetime. Intel, which has little background in developing consumer-friendly experiences, seems like a long shot at cracking the digital TV nut.

The Intel Plan:

Intel has pitched media companies on a plan to create a “virtual cable operator,” which would offer U.S. TV channels nationwide over the Internet in a bundle similar to subscriptions sold by cable- and satellite-TV operators, people familiar with the effort said previously. The company, besides expertise in chips for set-top boxes, has expertise in server technology that could help serve up video programming and other content.

Interesting idea…but not so fast, says the cable operators!

Persuading companies to license individual channels would require far higher fees than the companies currently receive, this executive said, noting that his company and Intel were far from reaching an agreement on financial terms.

But Intel has so far reached at least one content deal, one of the people familiar with Intel’s plans said, without identifying the partner.

One content provider does not a cable TV replacement make. And this is the problem not just for Google and Intel but also for Apple. How do you convince the cable companies to let you have content in a more consumer-friendly format that will make them less money and take their power position away?

Steve Jobs may have been able to convince the music industry to do so, but it is pretty clear Eddy Cue is having a hard time cracking the TV biz (Jobs’ bio notwithstanding).

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