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Summary:

It has only been a few weeks since Google (NSDQ: GOOG) announced it would create a brave, new world with its Google TV platform. In all the…

Google TV

It has only been a few weeks since Google (NSDQ: GOOG) announced it would create a brave, new world with its Google TV platform. In all the reactions and the commentary, I have been amazed at how little people understand what’s really going on here. Let me summarize: Google TV is a bigger deal than you think. In fact, it is so big that I scrapped the blog post I drafted about it because only a full-length report (with supporting survey data) could adequately explain what Google TV has done and will do to the TV market. Allow me to explain why the report was necessary.

Some have expressed surprise that Google would even care about TV in the first place. After all, Google takes nearly $7 billion dollars into its coffers each quarter from that little old search engine it sports, a run-rate of $27 billion a year. In fact, this has long been a problem Google faces — its core business is so terribly profitable that it’s hard to justify investing in its acquisitions and side projects that have zero hope of ever contributing meaningfully to the business (not unlike the problem at Microsoft (NSDQ: MSFT) where Windows 7 is Microsoft). So why would Google bother with the old TV in our living rooms?

Because TV matters in a way that nothing else does. Each year, the TV drives roughly $70 billion in advertising and an equal amount in cable and satellite fees, and another $25 billion in consumer-electronics sales. Plus, viewers spend 4.5 hours a day with it — which is, mind you, the equivalent of a full-time job in some socialist-leaning countries (I’ll refrain from naming names).

Google’s goal is to get into that marketplace, eventually appropriating a healthy chunk of the billions in advertising that flow to and through the TV today with such painful inefficiency.

Okay, you give in, you say. TV’s a big deal. But haven’t so many tried this before? That’s essentially the point Steve Jobs used to marginalize Google TV on stage at D8. With all respect to the man (generally, a genius), he’s wrong.

Yes, it’s hard. Yes, it has been tried before. But no, Google TV is not in the same situation as Roku, Vudu, Boxee or even Apple (NSDQ: AAPL) TV. Google TV is different; it’s more ambitious yet more likely to succeed. First of all, timing matters. With broadband penetration at two-thirds of U.S. households — higher in many European and Asian markets — and with home networks in more than a third of U.S. homes, the base layer of high-speed connectivity to and in the home can support Google’s ambitions. Plus, there’s enough content online between YouTube, Hulu and Netflix (NSDQ: NFLX), to make it worth the bother of connecting the TV (which, by the way, is why nearly 10 million homes in the U.S. connect their PCs to their TVs to watch that content today, so Google’s asking us to do something millions of us already do).

But the mere combination of content and technology isn’t enough to make this work. There has to be a path to market that is likely to succeed, and Google’s list of partners is what makes this worthy of consideration. Sure, Intel (NSDQ: INTC) has been standing in the background, eager to wedge into the TV business for some time. Logitech hopes to provide the peripherals — boxes, keyboards, pointers, even cameras — that will populate the living room. But none of those partners can drive a large, open market of consumers using Google TV, which is precisely what developers will want to see before they ignite the innovation necessary to take TV experience to the next level.

That’s where Sony (NYSE: SNE) comes in. Sony has been selling connected TVs for longer than any other TV maker. It obsesses about R&D and its connected TVs are actually relatively robust compared to some others that rely on cheaper silicon and have a less elegant user interface. Yet Sony willingly set that technology investment aside — giddily, as Sir Howard Stringer himself said — and tied its fate to Google TV. This will make all the difference, giving Google TV a shot at reaching millions of homes by year-end 2011.

More to the point, it is Sony’s involvement that will cause everyone else to accelerate their own efforts. Competing TV makers will sign up by the end of the year, mark my word. Cable companies will accelerate their TV Everywhere solutions to ensure that they don’t get pushed to one side. Most of all, Apple itself will have to respond.

In fact, Apple will kick itself that it didn’t tackle TV in a similar fashion sooner. Jobs has admitted the Apple TV was a hobby and has painted the entire TV market as nearly impossible to overhaul. But he’s hiding from the fact that his solution — and all the other solutions tried so far — didn’t really bring the kind of power to the TV that Google TV will. The Apple TV, on a good day, is capable of taking your attention for no more than an hour, two at most, and then only if you have paid to rent or download a movie from iTunes. That’s an infrequent scenario at best. Google TV will be a persistent interface that resides on your TV, giving you access to search functions (searching linear programming, web video, and even the general Web to get IMDB facts or background on the season finale of Glee) any time you’re watching TV, not just when you switch the input.

It’s a critical difference that makes Google TV unique compared to all previous attempts to “Webitize” the TV. And it’s the difference that will matter at scale, thanks to TV manufacturers that will support it. And it’s the difference that will matter to developers, who will want to appeal to millions of consumers through a persistent interface, not a sidekick box in the living room. That’s why Google TV is bigger than you think — it will occupy more of your time and attention than you think. Then, once it has your attention, it can begin siphoning away ad dollars. Oops, did I just reveal the nefarious master plan? You bet I did.

James McQuivey is an analyst at Forrester Research, where he serves Consumer Product Strategy professionals. James blogs here.

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This article originally appeared in Forrester Research.

  1. Meh, Apple’s tried this pony. Didn’t work. Just because there is a market here, doesn’t mean it is going to translate into penetration. People don’t want to pay for a set top box. Move on.

  2. Karsten Weide Thursday, June 10, 2010

    The Google TV hardware is just too expensive to matter in a big way for a while to come.

  3. “And it’s the difference that will matter to developers, who will want to appeal to millions of consumers through a persistent interface, not a sidekick box in the living room.”

    Ahh James – that’s the part you may be missing here: Millions of consumers already have amazing access to search, internet, etc., while they watch TV – it’s called a smartphone. And with the iPad (and all the similar products to come), millions more will have the same access.

    Here’s the issue: When we’re watching Glee, I don’t think I want to watch my wife do web searches on the TV at the same time. And she doesn’t want to watch me pull up baseball scores. That’s why a smartphone or iPad is so slick: We’re all watching TV, but can do all of our “side” internet tasks without bothering one another.

    Furthermore, so many people have just finished upgrading to the latest-and-greatest 1080p televisions…now we’re supposed to toss them out to get web search and YouTube on our tvs?

    “Oops, did I just reveal the nefarious master plan? You bet I did.” –> The grand plan is to sell lots of iPads, iPhones, Droids, Dell Dashes, etc. That’s how we’ll all do our companion web tasks without driving our spouses, children, grandma, etc. crazy.

    And, yes, If someone wants to watch a YouTube video on the big screen and share with the family, all of these devices will be able to “push” the link to the TV. Just give the ecosystem a couple of cycles.

  4. $100 for the google box? No thanks. Anyway, this is nothing new. I got a program from seetvpc.com, then connected my laptop to my TV with a S-cable. I don’t have Cable TV because of this.
    Google just knows how to spin their “revolutionary” ideas. Amazing how the mainstream media reacts to any Google announcement. It’s Wizardry and Snake Oil. Nothing new and revolutionary.

  5. Great article James….and I agree that Apple missed an opportunity here. But I think the reason is very simple, and is proven in Jobs comments at ‘D': Apple is a hardware company. This is how they think and what drives their entire approach to the market. As Jobs said, “no one wants to buy a box”, and therefore there is no opportunity for Apple, the hardware company.

    But Google is a software company, a very pure software company. To them, getting their code on as many ‘boxes’ as possible is the success. In fact, the code itself isnt the success, its the connection to Google.com that is the success. In any case, if Apple would think more like a software company, we likely would have Apple TV in our TV, instead of what I expect to be an Apple TV someday to compete with Sony, Samsung, etc.

    Google TV in our TV will be grand, and partnering and providing code is absolutely the way to go, just as it was with Android (Nexus One was to kick device manuf in the ass to get them moving faster). Good Luck Google, and you are welcome to come to my TV!

  6. These are great comments, folks, thank you. As I said, I felt compelled to write our full-length report because I don’t think “this has been tried before.” If Google TV fails, it won’t be because it copied everybody else. Just some things to chew on:

    1 – You may not want to buy a new box. But 22 million TVs sell in the US every year. If the biggest TV manufacturers put this in their TVs as default options (there are some very good reasons for them to do so which I don’t go into here, but could), then by definition we will get millions of Google TV devices in the market each year just through the natural process of selling TVs. Add to that the number of people who are finally upgrading to Blu-ray, and you have the potential for 10 million of these devices in people’s homes as early as end-of-year 2011, but certainly 2012. That’s 10 times as many Google TV devices as Apple TVs in roughly the same time period. Ouch.
    2 – I love Will’s point about the value of mobile devices in the home. I agree completely about the utility of that device in the living room. So does Google — they’re already building in the ability to push things from the mobile device to the TV. In fact, I think the two work well together. When you do a lot more of this with your mobile device, it trains you to think of TV-proximate interactivity as a normal thing. Choosing to push even just a few of those searches to the TV is victory, because Google can then start monetizing those searches.

  7. Can someone give us some advice. We operate a recipe site, http://www.MrFood.com and we have over 28 years of our TV show on-line on our own video server. On our other sites, such as http://www.FaveCrafts.com which is a crafting site, we post how-to craft videos on http://www.YouTube.com. What are the pros and cons of each. We are obviously perplexed as to the right course and recognize the conversion of PC and TV is coming, ala Google TV and others. Thank you

  8. This article does not take into account that the TV manufacturers already setup deals directly with content providers. Samsung just released an IPTV with “Samsung Apps” program to distribute custom content.

    I keep seeing the word “Google TV” but I see no substance in terms of programming content or any other type of content. We are also assuming that a “search model” will work over a “social model” when it comes to IPTV.

  9. B Becker,

    I’m from Chicago and familiar with the late,great Mr. Food.

    Your best bet is to keep a hub-and-spoke strategy from your video server only to distribution channels that has monetization options. In order words, focus on the iPad for us to watch in our kitchen or our craft room or obtain a license agreement with royalty to play on premium IPTV networks.

    Do not give it away for free!!!!!

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