A byproduct of today's blockbuster deal by Google to acquire Motorola Mobility for $12.5 billion is that Google is getting its nose into pay-TV operators' tent via Motorola's huge set-top box business. Set-tops are part of Motorola's Home segment, which in Q2 generated over $900 million in revenue, a little less than a third of Motorola's total.
Google would dearly love to have a bigger presence in the digital living room, but its initial efforts with Google TV have not borne much fruit, despite the fact that Google took an industry-friendly approach by trying to augment pay-TV services rather than disrupt them. Now however, with Motorola's deep industry relationships, Google will gain much better insight into pay-TV operators' thinking that could help drive partnership opportunities. Importantly, this could translate into improved product integration between Google's software and Motorola's hardware platforms that could give Google its best shot yet at getting into the living room (throw Google potentially acquiring Hulu and the living room fight gets even more interesting).
On this morning's management call, there were few specifics offered up on the deal's impact on the home business (or even the mobile business for that matter where "supercharged" was the watch word) other than "excitement" about future opportunities around the convergence of mobile and set-tops. As big a supporter of Android that Motorola has been for smartphones, it was not an initial partner for Google TV (only Logitech and Sony were). Motorola was likely taking a cautious approach given the importance of its pay-TV relationships.
But the timing for Google's involvement in Motorola's set-tops could be right. The set-top box business is in flux, as pay-TV operators seek to reduce capex spending and also compete more effectively against over-the-top IP-only services. Google TV - or a comparable layer of software - could help drive the app ecosystem to Motorola's set-tops, in turn strengthening pay-TV operators' value prop. Meanwhile, in Q2 the pay-TV industry notched its worst subscriber losses ever, turning up the heat for fresh industry marketing messages.
Another factor in the mix is the long-running rumor of Apple's intent to unveil a television set of its own, which could be disruptive to the pay-TV model. Just as wireless carriers have used Android as a counter-weight to Apple's iPhone dominance, pay-TV operators could come to view a Motorola/Google TV platform as a weapon against Apple's incursions.
For now though, this is mostly speculation. In his closing comments on this morning's call, Google's CEO Larry Page simply added that Motorola's a "leading home device maker" which is "another big opportunity." How Google capitalizes on it will keep the industry's attention.
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