Cable companies don’t like open platforms

Turning Motorola Mobility’s set-top boxes into Google TV devices may sound good on paper, but it’s much easier said than done. Sure, cable operators like Comcast are looking to lease next-generation set-top boxes to their customers that combine traditional pay TV with internet content, hook into social networks and are capable of running apps and widgets. But in the end, these are going to be Comcast boxes, not Google boxes.

Cable operators love advanced set-top boxes, but they don’t want to give up control.

Operators want to have control of the devices they’re offering, and they’re not ready to hand over the keys to a third party. That’s especially important for any kind of app store running on a cable box: Pay TV operators want to have the final say on which apps are running on their devices. The Google Play app store, which doesn’t even require approval of apps from Google itself, is fundamentally incompatible with this kind of thinking. Add in Google TV’s ability to run third-party apps not distributed via Google Play, and you’ve got yourself a deal-breaker.

Google TV VP of Product Mario Queiroz told me at Google I/O that the company is still looking to distribute the TV platform via set-top boxes, but he acknowledged that the focus for this isn’t the U.S. market. Queiroz told me that Google is having conversations with pay TV operators outside of the U.S. about these kinds of partnerships.

However, three-quarters of Motorola’s home biz revenue comes from North America, where companies like Comcast and Verizon are some of its biggest customers. That’s why Motorola recently licensed Comcast’s reference design kit for advanced set-top boxes, and that’s why we won’t see a Motorola set-top box running Google TV any time soon.

The set-top box is slowly fading away

There’s another reason that Google may be losing interest in manufacturing its own pay TV set-top boxes: the market is slowly moving away from the product. Sure, your cable company is still eager to lease you one of its boxes as soon as you sign a contract with them. But at the same time, it’s increasingly providing programming to other devices.

TV Everywhere websites stream shows to authenticated customers, iPad apps can be used to watch live TV, and devices like the Xbox are increasingly looking like a cable box as well. Add to this the rumors that Apple is looking to add cable programming to a next-generation Apple TV product, and it becomes clear that pay TV is moving towards a “bring your own device” future.

That’s bad news for a hardware maker like Motorola, but actually really good for a platform like Google TV. After all, it could enable future Google TV devices to get a lot more programming without the current work-around that requires Google TV devices to come with two HDMI ports: one to ingest the signal coming from your cable box, one to pipe Google TV’s mix of cable programming and apps to the TV screen.

And TV Everywhere is only one side of this coin. The other is Allvid, the FCC’s proposal that would give device manufacturers access to encrypted cable feeds without the need for a set-top box or a Cablecard decryption module. Google is a big proponent of Allvid. Motorola Mobility? Not so much. In its 2011 annual report (PDF), the then-still-independent company wrote: “If adopted, such proposals could negatively impact our set-top box business and limit our ability to innovate.”

So what does this mean for Google TV?

All of this shows why it makes sense for Google to get rid of Motorola Mobility’s home business. However, it also proves yet again that there’s no magic bullet to help Google TV to succeed. Sure, the company could still partner with third-party manufacturers to build Google TV-powered set-top boxes for foreign markets. But in the U.S., it will have to do it the hard way and compete with Apple TV, Roku and others in the retail business, hoping that consumers will eventually bite.

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First, the good news for Google TV: Vizio introduced two TV sets as well as a Roku-like set-top box and a Blu-ray player, all of which will feature Google TV with the company’s own UI design. Sony added another Blu-ray player and a media player device to its existing Google TV lineup, and LG introduced two 3-D TV sets that combine Google TV with the company’s own smart TV UI. Google also announced that Samsung will introduce additional devices later this year and boasted partnerships with chip makers Marvell and MediaTek.

Lenovo shuns Android Market

Lenovo's first TV set runs Android but not Google TV.

However, there were also signs that some CE makers may like Android but not necessarily Google’s take on the future of TV. Chinese TV maker Lenovo took its first ambitious step toward the living room with the introduction of the world’s first TV based on Android 4.0, also known as Ice Cream Sandwich. The feature-rich Lenovo K91 will initially be available in China only, and it won’t have access to the Android Market or any of the TV apps developed by Google. Owners of the device will instead be able to download apps straight from Lenovo’s own Android app store, which the company is operating in China, on other Android devices as well.

Lenovo wasn’t the only one to stray from the Google TV bandwagon: Despite being an official Google TV partner, Samsung introduced a webcam that is fully loaded with a highly customized version of Android to bring Skype video chat and other apps to legacy TV sets. It’s a curious move but one that could be copied by other CE makers for add-on gadgets and even full-blown TV sets.

Learning from Amazon’s Kindle Fire

Going through the process of becoming official Google TV partners and getting their devices Android certified means that manufacturers have to fulfill a number of requirements. Manufacturers may simply decide that it’s cheaper to work with a customized, slimmed-down version of Android and do without access to Google’s ecosystem. And if the Kindle Fire teaches us anything, it’s that a cheap but highly customized Android platform can compete just fine with Google’s official versions.

I talked about this issue with Google TV VP of product management Mario Queiroz this week, who told me he doesn’t see any imminent Kindle Fire–like threat for Google TV. “I’m not concerned about fragmentation,” he said, adding that the Google TV stack isn’t just about being compatible with Android. It also offers additional functionality that is not available to customized implementations like Lenovo’s Android TV.

Operators are taking baby steps

There are signs that Android could spell trouble for Google TV even if Queiroz is right about the CE market. Google’s next big goal after the new devices from LG, Vizio and company hit the shelves this year is to get pay-TV operators to adopt the platform. That’s one of the reasons why Google is purchasing Motorola Mobility, and that’s also why the partnership with Marvell is so important. “We absolutely see the operator and retail set-top box market as a great opportunity for Google TV,” acknowledged Queiroz this week.

Marvell's ARMADA 1500 processor is powering the latest generation of Google TV devices, but the company is also betting on other flavors of Android-powered set-top boxes.

The question is, Will operators sign on? Marvell Senior Product Marketing Manager Edward Silva, whose company supplies Google’s hardware partners with the processor that powers the latest generation of Google TVs, is cautious. “It will be a matter of time before they open up their walled garden,” he told me during an interview last week.

Silva said that operators have been looking for an open platform for some time to power their next generation of set-top boxes, and Marvell is expecting that some of these new Android set-tops will come to market in the second half of this year. However, it’s doubtful whether cable and satellite will be ready to open their devices up to Google’s Android Market. “The operators are taking baby steps now,” he said.

Android in the cloud

Silva isn’t the only one who is skeptical. “The cable operators are not ready to embrace Google TV and Android as a whole,” I was told by Myriad Group Business Development VP Olivier Bartholot when I quizzed him about the topic. Myriad has been active in the mobile phone space for years, and the company recently started to offer Android-based solutions to pay-TV operators. The company’s pitch goes a little bit like this: We’ll give you all the apps your customers want — but none of the ones you don’t.

Myriad announced a partnership with Broadcom at CES to bring its Alien Vue platform to next-generation set-top boxes, but its take on legacy hardware is even more interesting. Myriad can host a completely customized version of Android in the cloud and then stream apps directly to your plain-old set-top box, much in the same way that OnLive streams games to all kinds of devices. Check out a demo of Alien Vue in the video below:

This means that cable operators can bring Android apps to their customers without investing in expensive new hardware or giving Google access to their platform. Bartholot is convinced that the latter is key. “A lot of customers that we are talking to are very concerned about Google TV,” he told me. On the other hand, Myriad is seeing a lot of interest in its solution, and in fact it is going to trial Alien Vue with a large U.S.-based pay-TV operator in the next few months.

Consumers want apps

A the same time, operators are realizing they have to offer some Google TV functionality to their customers. “It all started with the take-up of over-the-top boxes,” said Bartholot. Google TV, Roku and all of the competitors may not have sold huge numbers, but they have definitely changed how consumers think about TVs and what they expect from the box they are renting from their cable company every month. Silva agreed. Consumers are demanding apps, so operators are moving toward Android, he told me.

The question is, Will they go for an open approach like Google TV or for a more controlled environment like Alien Vue? Google’s Queiroz is convinced he can convince the industry to join him. “There are a number of operators that are eager to have the functionality [of Google TV] rather sooner than later,” he told me, adding that Google might strike its first partnerships outside the U.S..

Bartholot, on the other hand, remains skeptical. Sure, operators could have a change of heart in the months and years to come and warm up to Google TV, he told me, adding, “But I don’t know if this will ever happen.”

Image courtesy of Flickr user carlstr

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Some content–like Hulu–is blocked on Google TV, but Queiroz said that shouldn’t be a problem for users: “We assume you have access to all of that content live or through your DVR.” And, he said, focus on blocked content “misses the point [because] there’s a lot of content you can access–more than 80,000 film titles and TV episodes in addition to live TV.” The bigger problem and Google’s main focus, he said, is users’ ability to discover content.

Discoverability is a lesson learned between the first iteration of Google TV, released last year–a product many users found disappointing–and the new update released on October 31, said Queiroz. “Search is interesting for the viewer but often people don’t know what they want to watch. We have a new TV and movies app that helps users find content across the Web.”

Other lessons learned since last year: Google aimed to make the user experience in the living room easier. The company noticed that many people were using YouTube on their TVs, so it beefed up Google TV’s YouTube app in recognition of that. And Google opened up an Android app market on Google TV, seeded it with about 50 apps to start and hopes to provide a “door into the living room for content owners and for developers large and small to bring their content to television.”

Queiroz sidestepped Kramer’s question about how Google plans to make money from Google TV. The company is focusing on user experience first, he said, as it did in the development of its mobile platform–and monetization can come later.

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