Monday, August 1, 2011, 10:04 AM ET|Posted by Will RichmondLast week Google TV got smacked around pretty hard, as Logitech, maker of the standalone Revue device, conceded that returns were running ahead of sales (which has now been updated to reflect returns from distributors, not consumers). The company took a $34 million writedown to cover the cost of reducing Revue's price from $249 to $99. And Logitech's CEO Gerald Quindlen, a big Google TV promoter, was shown the d
oor in the process.
It's tempting to conclude that Google TV is toast. However, a small bit of news that got little attention last week suggests that there may still be hope for Google TV: it turns out that Apple TV sold a very respectable 480K units in Q2, which was 70% higher than a year ago, according to Concord Securities analyst Ming-Chi Kuo. And with the holiday season just ahead, quarterly sales are likely to move still higher, making Apple TV a sleeper hit among connected devices.
Readers will remember that the first generation of Apple TV - priced at $299 (the same as Revue's original price) - got off to a relatively slow start, though not nearly as bad as Google TV's. For its 2nd generation, Apple TV was reconfigured - no hard drive, much smaller size and importantly, a price reduction to $99. "AirPlay," a feature allowing certain video from other iOS devices to be pushed to Apple TV and displayed on the television was also introduced. From a content perspective, a few new apps, from Netflix and others, were unveiled, but mainly content choices are still focused on iTunes plus home video and photos. Taken together - and with the massive tailwind of Apple's other products - Apple TV has started to gain traction in its second life. Could the same happen with Google TV 2.0?
The challenge is that for now anyway, Google has much higher aspirations for Google TV than Apple has for Apple TV. While Apple executives till refer to Apple TV as "a hobby," Google's lofty objective for Google TV was to bring the whole Internet to the TV. That immediately tripped up Google TV, as Hulu and broadcast TV networks blocked the device from accessing their sites. Like others, I believed that was a mistake by the networks, who could have used Google TV to further fuel online engagement with their shows, but on TV. However, it turned out networks didn't actually want this; as retransmission consent fees have become their dominant motivation (further evidenced by Fox's new 8-day paywall), their new goal is to limit, rather than extend, easy online access.
Not being able to access the best video available online through Google TV seriously compromised the product, but there were other problems as well: a high $299 price point when competitors like Apple TV and Roku were under $100 (not to mention inexpensive game consoles and Blu-ray players that also provided online access), a complicated product design, minimal marketing support from Google itself, a lack of a killer app, etc. Add it all up, and Google TV stood little chance.
So what comes next? The most natural thing is to have Google TV be software-only and embedded in connected devices, as Sony has done. Since Google can't pin its hopes on broadcast networks' programs being available for free, there may be a way to for Google TV to streamline authenticated access to their programs, which would be a welcome step (though far from a killer app). Google TV's strongest card to play is probably with interactivity and apps. As Honeycomb, the last version of Android, is introduced to devices that Google TV can interact with, there will be many more apps available to Google TV owners. That could be a real differentiator to draw buyers away from Apple TV, Roku and others.
In the meantime though, Google TV is a cautionary tale in moving too early. However, Apple TV's resurgence shows there can be second acts for these devices. And, heck, throwing stuff out there before it's truly ready is what Google is famous for - maybe Logitech just didn't realize this. With virtually unlimited resources, Google can refine and stick with Google TV as long as it likes. The living room - like the smartphone - is too important a battleground for Google not to compete for. And if Apple does move forward with its own television at some point, as is widely rumored, TV OEMs will be thankful for Google TV software than allows them to compete better, much as Android has done for them vs. the iPhone.
So yes, Google TV 1.0 was a flop, but there are many more chapters yet to be written.