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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.
This article originally appeared in Forrester Research.