OnCue off course as exec exits cast doubts on Verizon’s TV plans

The future of Verizon’s (S VZ) OnCue TV service looks uncertain less than half a year after the telco giant bought OnCue from Intel (S INTC). Not only did OnCue boss Erik Huggers abruptly leave the company late last week, other executives have also jumped ship or decided to stay with Intel, and recent remarks from Verizon CEO Lowell McAdam make the company’s plans for OnCue sound a lot less ambitious.

Back in January, it seemed like Verizon had big plans for OnCue, the TV service that Intel’s Intel Media unit had been developing since late 2011. In a press release, Verizon said that it was going to use OnCue to “accelerate the availability of next-generation video services, both integrated with Verizon FiOS fiber-optic networks and delivered ‘over the top’ to any device.” That sounded very much like Intel’s original vision for OnCue, which was to take on traditional TV providers like Comcast (S CMCSK) with a streamed offering that would include live TV and video on demand.

Fast forward four months, and the tone has significantly changed. Here’s what McAdam said about OnCue at the J.P. Morgan Global Technology, Media and Telecom conference a little more than a week ago:

“That group was built originally almost to create a linear TV offering as a pure over-the-top play. Now we don’t think that model is particularly attractive because of the overall content cost.”

He went on to describe OnCue’s future more as something that would mix YouTube-like content with VOD titles, and added:

“There may be some of the content that you see from the CBS’s (S CBS) and the ABC’s, (S DIS) we hope there is and we are having discussions with them. But it can’t be the bundle 10 channels together and force them to take it over-the-top the way they have done in the current linear model.”

I’ve heard from sources in the know that the OnCue team was taken aback by these comments. In fact, for some, this may have been a bit of a deja vu. Intel initially had big plans for OnCue, and committed hundreds of millions to build a strong team that ran tests with thousands of users in multiple markets. Then, the company underwent a change at the helm, and Intel’s new CEO started to publicly express doubts over the TV business.

Huggers, who had led the OnCue team since its inception at Intel, told Reuters last week that there were “no conflicts at all” that led to his departure, and went on to call OnCue’s future “secure.” Still, it’s hard to believe that the timing of his departure, which came just about a week after McAdams’ remarks, is a coincidence.

And Huggers is not alone: OnCue’s head of hardware engineering Fraser Stirling left Verizon for a job at Comcast last month. OnCue’s Head of Marketing Courtnee Westendorf, who previously worked as a marketing executive for Apple (S AAPL) for 12 years, decided to stay with Intel and not join Verizon when the deal closed earlier this spring. She was joined in that decision by Eric Free, head of content and services, and Moe Khosravy, head of software development.

I asked Verizon how many employees of OnCue’s team of 350 have stayed on, and how the plans for OnCue have evolved, and a spokesperson sent me this response:

“We obtained a strong combination of technological and personnel assets from Intel Media. We intend to strategically utilize the OnCue technology and talent to grow our business. That has not changed.”

The question will be how many members of OnCue’s team will be content with being strategically utilized, and how many are going to follow Huggers out of the door in the coming months.