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Here's How Google TV Will Work - And What It Might Mean

Wednesday, March 24, 2010, 09:45 AM ET
posted by: Will Richmond
Last week, the NY Times shared some details of "Google TV," the new set-top box Google is developing in partnership with Intel and Sony. The article provided a good outline, and now, based on additional information I've gathered, I'm able to provide new details on the box and also explain what it might mean.

The first and most important thing to know about Google TV is that it is not being positioned to induce users to "cut the cord" on their subscriptions to existing multichannel video programming distributors' ("MVPDs" like cable, satellite or telco) services. Or at least that's Google's initial positioning; whether it's genuine or really just a Trojan Horse game plan is another whole matter. For now anyway, Google is taking a "friend of the industry" approach, telling MVPDs that it's briefing that it is looking to complement their businesses by bringing the full Internet to the TV (this follows the same convergence theme as the new Kylo browser).

Google is contemplating an entirely novel strategy for its set-top box, seeking to insert it alongside the existing MVPD's set-top box by daisy chaining them together via HDMI connections. In other words, the MVPD's set-top's HDMI output would be connected to the Google TV set-top's HDMI input, and then its HDMI output would be connected to the TV. The authorized TV channels would still be delivered, but Google TV would collect data from the MVPD's set-top and introduce an entirely new UI for users to control their TV experience, to include searching and browsing channels. It would also add a host of new interactive web-type capabilities around the content.
 
Since the Google TV box would have a full browser and connect to the Internet via the user's WiFi or wired access, it would also bring all of the rest of the Internet to the TV as well, including the full breadth of online video (yes, that would mean one more thing for Hulu to block). My understanding is that on the whole, the Google TV experience is extremely impressive and well conceived. In short, it will get the attention of any MVPD executive who has a look at it and will certainly get them to thinking about how able - or unable - they are to deliver a similar experience themselves to their subscribers.

A key reason that Google is planning to insert its box this way is because it believes that in order to deliver a compelling Internet experience on TV requires a new web-based, and open platform. For Google that of course means Android, which it is vigorously proliferating on smartphones as well. Throw in Google's Chrome browser that it is promoting for online usage and you get a glimpse of how Google's multi-platform strategy comes together. While Sony would be making the box, you have to believe it will have Google branding on it, a first for the company in the living room too.

Though it's a given that Google views a new set-top in living rooms as a way to sell more ads and deepen its engagement with users, what has to be noted here as well is that had MVPDs' set-tops been more flexible and capable of running Internet apps in the first place, Google's challenge to get a toehold in the living room with a new set-top would surely have been a lot harder (i.e. who needs a new box when the existing one does some/most of what the new one purports to do?).

To be fair, the cable industry for its part has been working hard to enhance and permeate tru2way and EBIF to drive interactivity and web compatibility for a while now. However, the reality is that consumers have long derided the UI and navigation that even state-of-the-art digital cable set-tops offer (especially as compared to the ever-improving experience the web delivers). I was reminded of this last week subsequent to my post on cable/Hollywood's new movies-on-demand ad campaign. A number of people emailed to tell me that the cable VOD UI is so cumbersome as compared with, for example Netflix and TiVo, that regardless of cable's day-and-date availability and 1-box ordering convenience, cable VOD was too severely handicapped to ever truly succeed. This synchs with what I've been told privately by numerous industry insiders over the years - that using its set-tops to fully incorporate everything the web offers is futile.  

All of this sets the stage for a fascinating negotiating dynamic between Google and the MVPDs.  On the one hand MVPDs will be threatened by mighty Google's new set-top, which could well disintermediate them long-term - if you buy into the Trojan Horse theory that this is just Step 1 in Google's long-term drive to own the living room. As a result, MVPDs could simply tell Google to pound sand, leaving the company to sell its $299 (likely retail price btw) set-top at retail.

Such a retail-only strategy for Google is fraught with risk because the gadgetry-feeling new box is very unlikely to sell in the millions (let alone the tens of millions) in these recessionary times. Google needs to look no further than about 5 miles east down Route 237 from Mountain View to Alviso where TiVo is based to understand just how hard it is to gain widespread adoption of a new high-end box through a retail-intensive strategy. No doubt that volume-hungry Intel and Sony will lose interest in Google TV plenty fast if its adoption curve mirrors TiVo's (and don't forget TiVo has offered the highly compelling functions of digital recording and ad-skipping!).

The better strategy for Google - and the one it's trying to pursue, possibly first with DISH Network - is to get MVPDs to partner with it to deploy the Google TV boxes. In this model the new Google set-top would be leased by the MVPD to the consumer as the enabler of a new $10-15/mo (my estimate) "now-enjoy-the-full-Internet-on-your-TV" type of service. Some of you are no doubt scratching your heads at this idea and saying "Wait, MVPDs promoting 2 separate boxes in the home? - that makes no sense!" "And, oh by the way, no way is an MVPD going to sign up to service an Android Google TV set-top either!" and "The idea of letting Google get between the MVPD and its customers? That's like inviting the fox into the henhouse!"

I get all of this, and for the largest MVPDs (Comcast likely at the top of the list, btw), these issues - and plenty of others I can think of - would make a Google pitch of this sort a very tough sell. However, plenty of MVPDs have over-the-top's long-term potential cord-cutting threats already squarely on their radar screens. Therefore, a deal with Google that offers an immediate convergence play, backed by Google's powerful brand and resources, plus the potential for new subscription and ancillary ad revenue sharing opportunities, could look awfully appetizing. Throw in the possibility that Google could sketch a path to a 1-box solution, meaning the MVPD gets the set-top capex off its balance sheet once and for all, and this could tip the deal for some.

All of this is more than speculative ruminations. Though we don't know Google's exact plan for Google TV, when combined with all of the other OTT activity, it could well be the final straw for some MVPDs to see the inevitability of an impending paradigm-shift.  This could force these MVPDs to reconsider their strategies for the tumultuous 10 years ahead. As I've said many times before, we needn't look any further than the demise of the U.S. auto industry - based on the strategic and product blunders they made 10 years ago - to understand how high the stakes are for MVPDs to get their current choices right.  With Google TV underway, the Internet wolf might finally be at the subscription TV providers' door. Having gobbled-up many incumbent business models already, Google must be taken seriously.

What do you think? Post a comment now (no sign-in required).

Categories: Cable TV Operators, Devices, Satellite, Telcos

Tags:
Google, Google TV, Comcast, DISH Network, Sony, Intel


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31 Comments posted

zephod
Wednesday, March 24, 2010, 11:22 ET
There may be two choices soon, Google and the other giant $S. Open source'rs are more familiar with Boxee and MythTV, but there's little room there for a deal with the MVPD's.
Every win now for Android brings it closer to being a major player in the OS world. Soon, more than us Droid lovers will know the name and trust it. This is a new brand in the making.
Rocker
Wednesday, March 24, 2010, 11:51 ET
Definitely a trojan horse. MVPD's will do everything they can to prevent a Google box from getting between their pipe and the screen. But I can see a deal being cut where all that functionality gets built into the MVPD's box. They won't want to go there, but that may be the fallback position.
Wednesday, March 24, 2010, 12:47 ET
Google's position in the daisy chain however also means that they in effect are getting all of the information benefits of the cable companies that also serve as ISPs. For households that use cable for TV and DSL for Internet access, then Google will have better information than either the cable company or the telco. Google's man-in-the-middle play here s/b viewed as a tremendous threat and disruption to the incumbents, and worse, could make them irrelevant over time should Google desire to provide addit'l competing services to households, where in effect they could now easily disintermediated the carriers fm the end-customer.

As for privacy issues, don't even get me started w/Google and this addit'l treasure trove of data ;)

From a Google perspective I'd have to say, "nice play" :)
Wednesday, March 24, 2010, 02:05 ET
Will, once again, you've outdone yourself. Thank you for continually writing pieces that combine the technical, relationship, and revenue challenges that all these new products face.

Thanks for doing your job from one online-TV CEO who's life you make easier!
Wednesday, March 24, 2010, 03:16 ET
@direwolff – totally agree with you on the “information benefits” that would accrue to Google via this strategy. With all online businesses, data providing insight on user behavior is hugely valuable. I didn’t even touch on the privacy issues, agree - that’s another whole can of worms.

@Ryan Janssen – thanks -:)
Nick Ehle
nickehle.com
Thursday, March 25, 2010, 07:58 ET
If Google's box takes off, Nielsen is at a big risk of being disintermediated. Noone will pay Nielsen for survey data around audience size if Google can provide the cold hard facts around audience.
Patrick Giblin
www.451degrees.com
Thursday, March 25, 2010, 08:00 ET
Interesting that you do not discuss how Cisco plays in all of this with their recent purchase of Scientific Atlanta...they have been a Sleeping Giant for a while now and going to make connectivity so much more robust and ready...they can change this entire platform in shorter time because they are IN the homes throughout the country and with the different MVPD's already. Look forward to a follow up or debate about this...
Thursday, March 25, 2010, 08:09 ET
This was a very informative article that helped me, get a handle on the whole GoogleTv concept. As a Dish Network user I am very interested in seeing what they do with the newest receivers . Adding a full web browser natively will open up media that is currently locked on to the computer. People will buy into Google branding , because they are Google. A huge edge other venues,ie Yahoo, MSM, etc don't have. People are more inclined tolerate Google have a look at their data then other search engines.
Of course the easy way to bring the web to your tv now is hooking up a computer to your tv, and pushing your computer to the tv,and audoto the sound system. However in many situations that may not be possible. So for now the next best thing is sett-top boxs like th Roku, and the new BoxeeBox, that offer web content to your tv.
You can read my ideas on Media and Tech on my blog linked above.
Friday, March 26, 2010, 06:57 ET
The Google TV box can be made for $50, not $299. They can use an ARM processor based platform, which is much lower power and much cheaper than Intel and provides all the same if not more 1080p and video streaming features.

The idea of doing HDMI pass-through and adding stuff to HDMI from the existing Cable/Satellite set-top-box sounds like a genius plan. If HDCP or however all those copy protection technologies of HDMI don't prevent that solution from happening or to be turned off by broadcasters, then my guess is that Google could provide a $100 retail solution including HDMI pass-through and infrared emitter that would basically be compatible with all existing set-top-boxes, no matter what Comcast and DirecTV think about this.

My guess though, even though Google TV will kill current broadcast monopolies and TV stations eventually, the Google TV solution will also completely revolutionize advertising for all TV stations. Basically, a TV station and broadcaster could opt-in to have Google manage personalized advertisment instead of the existing common denomiator type of TV advertisement. By doing that, the revenues from TV ads would go up 10 times overnight. So either they can decide to show 10x less ads for the same content, or they can make 10x more money and use some of it to create better contents.

In my opinion, the real deal here is to bring Youtube to the HDTV. But also to provide a recommendations box for broadcast TV as well. Imagine the Google TV learns what you like, because the Google TV remote control will have one big green "Like" button, users click it when they are watching something that they like. That will help Google learn your taste. And if you want to watch TV but you are too lazy to research what content is available, Google can generate recommended content queues for you, of either live or on-demand content, and a mix of both.

A cool little app that will change the TV and movie business seriously, because Google TV is open source, itnegrated BitTorrent downloads and RSS will not be stoppable. Which means, you want a movie, just type in the title and the device will start the BitTorrent download automatically, be it legal or not. And StreamTorrent type technology can even let you nearly instantly stream any contents using p2p technology. Net Neutrality will make this great.
James Harris
www.droid101.com
Friday, March 26, 2010, 08:54 ET
Dear Sir,

This is my first visit to you site and I found your perspective insightful. However, I think that you are missing the real play for GoogeTV. Google is playing nice with the MVPDs as a tip of the hat. They want the TV manufactures as their partner. Forget the MVPDs, they are a waiting of time - Sheep waiting to be slaughtered! Intel wants to sell a board for the 1 billion+ TV that will be manufacture in the coming year. Sony is only in this gang because they are so far behind in the internet/TV space and Vizio is eating their lunch. Google simply wants it all.

My prediction is that you will see Google leverage Sony's PR machine, more than Intel's, to create Massive hype of the new device and UI. I would even think that Sony would enhance the their version of the android based OS to include some IP that they already own, like the Xbar interface found on PS3, PSP, etc. Eveyone wins. The next step is for Google to open source the platform, for Intel to sell a ton of mini-itx Atom based motherboard to all the DIYers, and for every TV manufacture to line up at the front door of Google, like bums in a soup line, hoping that they can integrate the platform into their products before the holiday rush and CES.

This is not a new game for Google. Look at the phone manufactures. This same model has worked for Google over the last two years and they have all but killed Windows mobile, Nokia and Palm. You have to remember that the MVPDs have little to no power of the TV manufactures. None. The TV manufactures have end customer relationships and loyalty. My bet is that MVPDs are toast! CES will prove my point. And Google will become the arms dealer of the Brand Wars for the TV manufactures - Android being the weapon of choice...

All the best,

James
Friday, March 26, 2010, 09:02 ET
Keep in mind: Google will need to forge deep partnerships with TV distributors (cable, telco, sat) to make this model work... they cannot pursue content deals directly with the networks. The challenge for Google, of course, is that TV distributors tend to be deeply fearful of Google. They saw what happened when their analogs in the Music industry partnered with Apple (loss of all distribution and pricing power). While Google is smart, MSOs are not blind to where this path would lead.
digitalis
Friday, March 26, 2010, 09:10 ET
No mention of miniweb? Miniweb and Blinkx will rule the set-top box video-search space!
James Harris
www.droid101.com
Friday, March 26, 2010, 09:10 ET
Sorry, I hit post a bit to early. This is the edited post.

Much respect,

James
www.droid101.com

--

Dear Sir,


This is my first visit to your site and I found your perspective insightful. However, I think that you are missing Google real intent as it relates to GoogeTV. Google is playing nice with the MVPDs as a tip of the hat. They want the TV manufactures as their partner. Forget the MVPDs, they are a waste of time - Sheep waiting to be slaughtered! Intel wants to sell a board for each of the 1 billion+ TVs that will be manufactured in the coming year. Sony is only a member of this "gang" because they are so far behind in the internet/TV space and Vizio is eating their lunch. Google simply wants it all.

My prediction is that you will see Google leverage Sony's PR machine, more than Intel's, to create massive hype around the new device and UI. I would even think that Sony would enhance the their version of the Android based OS to include some their own IP, like the Xbar interface that runs their PS3, PSP, etc. Eveyone wins.

The next step for Google is to open source the platform, for Intel to sell a ton of mini-itx Atom based motherboard to all the DIYers, and for every TV manufacture to line up at the front door of Google HQ (like bums in a soup line) hoping that they can integrate the platform into their products before the holiday sales rush and CES.

This is not a new game plan for Google. Look at the phone manufactures. This same model has worked for Google over the last two years and they have all but killed off Windows mobile, Nokia and Palm. You have to remember that the MVPDs have little to no power of the TV manufactures. None. The TV manufactures have end customer relationships and loyalty - I happen to be a Sony man myself.

My bet is that MVPDs are toast by 2013! CES 2011 will prove my point true; As Google becomes the arms dealer of the "TV Brand Wars" - Android being the weapon of choice...

All the best,
James
Friday, March 26, 2010, 09:29 ET
@James, all due respect, but Google TV without content = FAIL. Content is absolutely the most critical factor in this equation, and the MVPDs are currently the sole gatekeepers to content (not to mention the pipes delivering the content). In this power play, the MVPDs have the leverage, not Google. The TV manufacturers provide no help to Google in terms of content or content distribution.
Chris
Friday, March 26, 2010, 01:11 ET
You hit it right on the head - why the MVPD's would bite - ancillary ad revenue sharing opportunities. The allure of that adjunct revenue stream would be too much to pass up, especially considering how well it has been working with the handset manufacturers in the mobile world.
Friday, March 26, 2010, 01:26 ET
If the product will be as good as I imagine, Google should invest on it's user base.
Hand out 10 million units for free, and solve the 67 year long problem TV has had to truly and accurately track what people are watching.

Things that Google Could do with a computer sitting on your living room:
-> Track TV viewer habits.
-> Based on your Google profile and your daily web browsing activity prepare a TV Ad Profile tailored to you.
-> Take over during commercial breaks and show me ads that I care about
-> Provide an interactive shopping experience right on the TV (no more call 1800, visit the advertisers site right there)

If Google thinks like I (and I bet they're smarter) they could be on this to truly transform TV.

If along those lines they let Android developers come in and deliver Apps, Games and what not, this thing will be unstoppable and those $399 per box will pay for themselves. It's only gonna cost them $4bn to give away 10million boxes, that's what they make on a single quarter.
Friday, March 26, 2010, 02:04 ET
People, you are all assuming the MVPDs can't do this (advertising, tracking, etc) without Google. Of course they can. Why would they hand their future over to Google?
pitsch
Friday, March 26, 2010, 02:14 ET
Google Radio failed. The model was based on radio stations as the intermediary level and audio ads, which never took off, as google has no particular audio/music branch. Just to replace boxee, tivo, windows media center or mythtv would not use the enourmous power google has on the net. data center power. lawyers. cloud operating engineering knowledge. google tv has to connect seemlessly to a personalized tv experience to be integrated into the google "philosophy" to collect as much consumer data as possible. what are the obstacles of a google tv browser/recorder? to be able to replace the ads, there are only two ways, overlay on the user side, daisychaining the signal, or overlay on the server side, using IP-tv. whats the legal difference of a virtual data locker and a private harddrive?
Friday, March 26, 2010, 03:44 ET
The future of television is not television ... this is Step 1 of a Google Trojan Horse strategy that is taking the LONG view:

http://wearetheweb.wordpress.com/2008/09/06/if-im-watching-the-national-convention-live-on-pbs-and-i-turn-to-my-friend-and-make-a-comment-in-response-to-something-david-brooks-just-said/

Friday, March 26, 2010, 05:32 ET
There's been talk about combining the Internet and television for a number of years. I even wrote a whole book about it but I won't give you a link here because it will look like I'm trying to sell it and be blamed for spamming this posting. Needless to say there will probably be some connection between the two but not in the way that most people think about it.

Most people don't realize why Congress made it law to have digital television in the first place. The television industry has been upset watching all of the advertising switch to the Internet and now with digital TV, it will allow interactive commercials and personalized advertisements for each individual home.

But Google's foray into Internet television is definitely something the television industry should fear. Of course this is only my personal opinion (because I have no secret information) but just look what they've done in the past, they buy up technologies that they see will benefit them and squash their competitors. But almost every company that refuses to rein in its growth will eventually invent their own demise.

There are wild times ahead of us especially for television producers, providers, advertisers and viewers.
Jon
Saturday, March 27, 2010, 08:52 ET
I bet my house that this doesn't work and flops.
Saturday, March 27, 2010, 10:36 ET
A few responses:

@Mike Berkley – I don’t agree that MVPDs can do this themselves. Legacy hardware really hamstrings them. That’s why Google sees an opportunity here.

@Pitsch and @Jon – You skepticism is completely warranted. As I tried to describe, none of this is a slam-dunk for Google. Despite everything they’ve tried, the company is still fundamentally a 1-trick pony.

@Gubatron – Yep – those are among the things Google surely has its eyes on. Not sure if you were totally serious about giving away 10M boxes for free, but it’s not far-fetched. There’s probably a business case to be made with MVPDs for how giving away these boxes makes sense. Plus, the PR benefits would be really attractive to Google. Just look at all the PR mileage they’re getting out of their fiber-to-the-home experiment.

@Chris – A couple of MVPD folks have already contacted me about how they can explore things with Google. Going to be interesting to see what plays out here.
Sunday, March 28, 2010, 04:54 ET
@will this process will take 5+ years to play out. Enough time for the MVPD's to refresh enough legacy STB hardware to give them confidence in their own path forward. The LAST thing they want to do is concede this kind of leverage to Google, Facebook, or any other tech company. They saw what happened to their music-industry counterparts.
Monday, March 29, 2010, 03:34 ET
I'm loving the concept of Google TV. I cannot believe that set-top boxes don't already have the internet that you can connect to your router. How hard can it be to set that up? Do you know of what kind of time-table Google is working with? When can we expect this thing to get to market because I can't wait to get one.
MikFinkel
Monday, March 29, 2010, 08:35 ET
Zadling, Not sure what you mean by: I cannot believe that set-top boxes don't already have the internet that you can connect to your router. How hard can it be to set that up?
My DirecTV box is hooked up to the internet. I have it wired in, there is also a wireless option. My tv is not on right now buy I just went to my DirecTV account to set up the DVR to record the whole season of Justified.
Anonymously
Google.TV
Friday, April 2, 2010, 04:08 ET
Here is how Google TV really works;

The Logitech part of the effort is a wireless display containing Google chrome browser, you click TV objects and have the related web page display on the wireless display. The wireless display also contains the EPG. The system provides a new advertising model that takes advantage of the environment that provides both the 2 foot and the 10 foot experience. It’s smart and resolves convergence once and for all. This is the mainstream PC/STB of the future and enables Google to control most TV advertising of the future as well as the platform.
harry
Tuesday, April 27, 2010, 08:16 ET
I would welcome you entry it gives us one more option.
harry
Tuesday, April 27, 2010, 08:19 ET
harry h The sooner the better!
Saturday, May 22, 2010, 09:15 ET
One point that hasn't been mentioned is that We'll be able to earn cash for watching stupid ads!!! SOMETHING I WANT TO SAY ABOUT... One senseless point some guy MIKE made WAS... "will this process will take 5+ years to play out. Enough time for the MVPD's to refresh enough legacy STB hardware to give them confidence in their own path forward. The LAST thing they want to do is concede this kind of leverage to Google." NO, THE OTHER TECH INDUSTRIES don't have 5 years to catch up BECAUSE this GOOGLE thing is here and WHO CARES about OTHERS??? You should care about your TV/WEB pleasure and YOUR POCKET. Be glad that GOOGLE wants to give you more choices!!! I'm sure you are not the son of CABLEVISION, COMCAST nor NBC/CBS/MTV/ATT, etc. I can't wait to surf from my bed and do all these other GOOGLETV things. I'll probably wait to see how it develops before I join. This is how USA was built... One has the idea, puts it to work and makes things better until the next guy. MIKE, dont sit on your ass to wait for your mom to make your every meal. Make yourself your own Ham and Cheese sometimes. JA, JA!!! THIS MOVE WILL MAKE OTHERS WANT/HAVE to improve their services. ARENT YOU TIRED OF same services MIKE? EXACTLY!!! Wake up bro! I know your mom doesn't still cook for you. Just a dumb example even that my mom makes most of my meals!!! Look at SPRINT and ATT. The 2 dumbasses NOW lowered their bill after BOOSTMOBILE AND METROPCS went to $50. U see how much them 2 care about U??? LET GOOGLE take charge for a while. NOW others will make claims, accusations and who knows what else to mess up, stop and or delay some GOOGLE aspects, BUT WILL HAVE TO GET OFF THEIR ASSES and IMPROVE THEIR CRAP!!! LETS OPEN OR ARMS and let the fireworks START THIS FALL. IT'LL all be ok MIKE... I'M SURE U R A NICE GUY. Let others worry about takeovers or so called monopolies, which it won't BE. ENJOY YOUR GADGETS and CHILL. LETS WORRY ABOUT PREVENTING Women's & Children abuse, but not about home gadgets/Internet takeover as you pointed it out! THANKS
Noel
Sunday, August 1, 2010, 01:33 ET
Is there a set-top box type thing that works with broadcast t.v. only? (I don't have cable) i have a newer HDTV and use and indoor antenna for local channels and would like to record shows if possible. Thank you!
louis vuitton purses
http://www.eluxuryc-mall.com/
Thursday, August 5, 2010, 11:18 ET
t’s smart and resolves convergence once and for all. This is the mainstream PC/STB of the future and enables Google to control most TV advertising of the future as well as the platform.


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