Blog Post

Google TV: Just out and already in trouble


Google TV, the much hyped attempt by the search engine giant to get their ads in front of television viewers, is due out this month. Chad talked about this new strategy on our blog and in our newsletters earlier this year. This month, Sony has released a new TV with the Google TV software installed. Logitech is due to release their set-top box (The Revue), also running the Google TV software (some form of Android / Chrome) in a few days.

There is no doubt in anyone's mind that Google can create a positive user experience. Software is a core competency. Furthermore, Google's Android and the open source application platform is rapidly replicating what Apple had created through iPhone Apps. There are very few high quality apps for the iPhone that don't now have an equivalent on the Google / Android platform. However, the promise that these apps can soon interact with your TV is exciting.

Enter the Networks: The problem with Google TV is not the technology. The ISP bandwidth is there. The TVs mostly have HDMI inputs these days. Wifi is now strong enough to support wireless networking in the house. Both Sony and Logitech have solved the input problem by putting keyboards on their remotes. The problem is content. The original idea was that Google TV was simply going to organize and aggregate all of the free content that is already available online. Put all this content in a box with a slick end-user, search-like, experience. Great idea... However, there are companies that have a vested interest to block that from happening.

The cable companies stand to lose the most from this innovation. With a well-organized TV-based experience, it is easy to envision a living room without a cable connection. Cable companies lose the subscription fees as people disconnect their services. And I'm not saying they don't have it coming. They have been delivering sub-par services for years. They offer hundreds of channels when most people only want about 7. But the problem is much bigger than the poorly organized cable companies.

The big problem is that money from the cable subscription fees also flows up to the big networks (NBC, CBS, ABC, Fox) in return for carrying their content. This has always been mystifying to me as this content is available over the air for free. But it exists.

This financial relationship is strong enough that ABC, NBC and CBS are blocking the Google TV software.

The networks are using a thinly veiled argument in my opinion. They are stating that Google is not doing enough to stop digital piracy. However, I believe these are really two different discussions. The networks are not happy that Google is trying to take their content and put ads around it...

To be fair, Google has offered to compensate them. The deal includes a percentage of ad revenues collected (don't you love Google's business model). However, the networks have something larger in mind I suspect.

By comparison, Netflix pays their content providers much more handsomely, including guarantees and up-front payments.

As an end-user of both the Internet and TV, I am outraged by the grid-lock we are seeing between the corporate giants. This entire argument seems outlandish when I can (and do) just hook up a laptop to my TV and side-step this entire problem. However, I know that the implications of this debate have long-ranging implications for corporate profits. We all know there is a big difference between the adoption of a new technology by bleeding edge geeks (such as myself) and having a widely accepted consumer-ready technology option on display at Best Buy.

Putting my business hat on for a second, I completely understand why the Television Networks are blocking Google TV. Why should they settle for lower revenues? Why can't Google offer a deal that is at least as lucrative (or even slight more fair) as Netflix? Google is a smart company. It seems to me that they went for the sucker punch here on the hopes that they could grab an early win, or at least stake out a favorable position for this negotiation.

What is clear to me is that this debate is going to start moving faster than it has. The Roku box has promised Hulu Plus in the next month. It also has an app platform and supports many widely-used services such as Pandora. Apple TV has just released their second generation TV box (running cooler and greener at just 6 watts) at an attractive $99 price point. Apple has also been in strong negotiations with the Networks to provide lower per-episode rental prices. I believe they have at least one (CBS?) that offers shows for $0.99 per rental. DLink is set to release their Boxee Box in November. Providing even more competition to the scene. As the holiday shopping season heats up, this will be interesting.

Will Google be able to save their TV venture? Stay tuned.