We have to say that we thought that Google had a plan. Our overwhelming understanding going forwards is that Google TV is ill-conceived and likely to be about as successful as Apple’s only failure in living memory ‘ the fated Apple TV device.
It’s fairly simple. For as long as Google is tied up in court with content companies, they cannot cut a deal with it to harness YouTube as a route to market. Which also means they cannot cut a deal with Google TV as a route to market, which means it is dead. Far be it from us to throw water on the party, but Google is really way out on this one, and has to pull something of a rabbit out of the hat to make its new invention have any appeal.
Let’s face it the success of YouTube has never had anything to do with user generated content. It has everything to do though with user control. It’s like someone said, ‘I’ve got this brilliant idea, let’s cut a deal with all the content companies in the world and then let normal everyday working folk copy and upload that content in snippets, along with their own content, to a web site. Let’s call it YouTube.’
Followed about five years later by someone saying, ‘I thought YOU were going to license the content.’
We are NOT fans of YouTube, we have to confess. Not big fans, maybe we like it a little. But as an idea that had traditional content on it, legally, it was a cracking idea. It was iTunes for Hollywood. But because of the legal action between Viacom and Google, in the news once again this week as more revelations spill out of court filings, it has proved far less appealing that it could have been.
It is now a place for comedy clips, little more than America’s Funniest Home Videos or You’ve Been Framed in the UK. Plus Piracy which is no business plan. Plus it acts as a video storage partner for the corporate world, and for every web site that pushed video as a medium. Because of that it remains safe, but not 100% essential and its better years may be behind it unless it can change big content’s attitude towards it.
We see YouTube as the equivalent of MySpace, and feel there must be a video Facebook just around the corner, a next generation product that gets it right, especially on the content licensing front. Hulu was supposed to be that site, but it’s like the record labels launching a music service (they did), it will be forgotten in the mists of time once it is held up to financial scrutiny ‘ the business just doesn’t work.
And in all of this legal posturing between YouTube and Viacom, for the four years, lies the fate of Google TV.
At first when we heard that Google TV was being launched the day after our last Faultline, we thought we’d have to do a news flash update for all our readers. And then we found that we were still thinking about it days later and reaching few conclusions.
Then it struck us. Google TV as a device has little consumer appeal from what has been announced so far. That doesn’t mean it can’t develop some, but it doesn’t have any yet. It appeals to publishers and advertisers, but not consumers.
Google and its partners, Intel, Logitech, Sony and Dish Network, all think that this will revolutionize TV. But the only revolutionary element here at Faultline we have been discussing for four years, using search to navigate programming, instead of an EPG.
Just like YouTube, instead of being the next generational phase of television, Google TV will do something else very well. It will stop arguments. For people who install it, it will allow the swift solution of those archetypal TV arguments ‘ everyone will be able to search the internet on their TV ‘ the commonest way to sort out an argument these days, instead of using their iPhone, Sony PSP or Phone to search. But possibly that’s all it will do.
Google and team think this will revolutionize TV. It involves an Intel chip, a special device that converts and plays most forms of internet held video, in a way that the TV can interpret. But this chip has most of the features and functions of your PC, and so can also run programs, quite complex programs. Google has ensured that it will be able to run all the programs in Android Market. Is it revolutionary that a TV runs programs? Well people who watch TV on their PC will wonder what’s so hot about that, because they can already run programs on their viewing platform.
These chips will appear in set tops and remote controls from Logitech, and TV sets from Sony, and they will be sold in Best Buy locations in the US by this autumn. They should also hit Europe shortly after Christmas, and Logitech says that it will have a set top with the Intel CE4100 Atom processor running at 1.2GHz, with 4GB of onboard storage, 802.11n Wi-Fi, HDMI output, Dolby 5.1 surround sound and two USB ports.
But what exactly is new? Well a specialized Qwerty keyboard in the remote control gives people the capability to key in a search, and although this IS new, it is only essential IF you accept that doing search on your TV is revolutionary. Most TV sets in pay TV environments already have a browser of sorts; so if they are connected to the internet (and increasingly all the top end all TV brands sell devices which are) surely they can do something akin to this anyway? And Apple TV (not to mention Apple TV II) were both able to interpret internet video for the TV screen, and both were a failure, so this can’t be the unique step of Google TV.
Google handsets will eventually be able to act as remote controls for these TV sets, but at AT&T the iPhone is already used as a remote control for its U-Verse customers there, so we’re not sure how much of that is new really.
Even the capability to build widgets into TV sets, tiny applications that can be executed on the CE4100 chip, was brought to us over a year ago by Yahoo! The only real difference is that a phone can already run these applications and there is already Android market with 50,000 plus apps. However most of these require touch capability and few people have touched their TV set in the last two decades, ever since reliable remote controls were invented. So it will need a new generation of TV applications on Android Market to make any difference.
The thing that struck us is that searching the internet to watch video, to date, has so far been a solitary activity, something you do alone. Perhaps this is because people are mostly searching for porn on their PCs or viewing YouTube clips when they should be working. There is little evidence from the introduction of services such as Apple TV, to suggest that people are all that ready to change their viewing habits based purely on internet video availability. Going back to Web TV, which was one of Microsoft’s early mistakes, there is some proof that a decade old audience had NO desire whatsoever to do this, although things have definitely changed in that department.
But if the broadcast or pay TV community got behind this initiative, then there would be some hope. A TV program that is broadcast can have its own web site, and it might even call up an associated widget. The applications might offer either a subscription to previous episodes or to previous series. Google could partner to bring advertising to this ‘catch up’ viewing and share it with the content owners. That’s if any of them trusted YouTube and would cut deals with it.
Right now TV shows found on the internet will have their existing advertising left in place, so at least at first there is no scope for Google to take a piece of this revenue. And if this was delivered by an Application written by say Sony Pictures or some such and hosted on Android Market, it would be a way to the TV and to the phone, in one go.
In fact back in April 2009 that was very much what was on the mind of YouTube when it announced deals with Sony Pictures, CBS, MGM, Lionsgate, Starz, and the BBC, to acquire thousands of TV episodes and hundreds of films.
Presumably that same content can now be found on Google TV, with or without a special App, as it can be found in a simple YouTube or Google search.
But this will simply register as more internet traffic for YouTube, and its existing experimental advertising revenue streams for this content, mostly pre-roll ads, will spike if Google TV ever takes off.
In effect Google TV may eventually solve the problem of how to make money out of bringing internet content to the TV, but it may not have solved the more important question of how to bring consumers around to the idea.
And it is ominous that Sony was happy to join the initiative and stand on the launch platform with Google TV to push its TV sets, but didn’t think it worthwhile to make a song and dance about its content initiatives with Google. Perhaps this is because this content requires a subscription.
Sony could take this further, much further. It could use YouTube as an extension to its major motion picture cinema releases and issue them through YouTube ‘ if it was totally happy that its films would not be ripped off, or that it would not compromise the already dwindling cinema audiences. It could certainly limit this to Google TV owners, but then what does Sony gain from this. It can already release films to the owners of the Bravia TVs which have an internet connection, without Google’s help.
And surely Sony would want to push its popular content through its own Crackle content site? Err’ Well no. Crackle is made up largely of content that is past its sell-by date with no popular or even classic movies in sight. Sony is more likely to give a first airing to content through the Blu-ray format or on its PS3 network. Which perhaps explains why the studio that is most Google TV friendly still never offered to sanctify its launch with new content offers.
Google TV will only ever work as a service, not as product. Selling applications onto the TV is the WRONG service. People want to watch content ‘ films or TV series, on their TV. And this is what’s missing from the Google TV offering right now. Although this may change.
Another aspect of the Google TV launch is that the Dish Network in the US says it will also integrate its HD DVR’s into the search process. Dish is the second largest satellite TV services in the US with 14 million subscribers and around 4 million using DVRs. Presumably those using HD DVRs are a minority of those 4 million, but Dish doesn’t break them out.
So although this may have a decent amount of appeal when a Dish DVR with Google TV built-in comes out later this year, it’s probably not enough to drag people away from DirecTV or the local cable firm. And if it doesn’t prove sufficiently appealing and bring Dish new customers, then the increased Subscriber Acquisition Cost that this will add to Dish costs will not be worth it, and it will drop the initiative.
Instead, this week people are assuming that other pay TV companies will take up the Google TV device defensively against Dish. Well they may, but certainly not before Christmas, and probably the new year when Dish numbers on this new product will be out and if DirecTV sense no wind of change in customer acquisition, then why add Google TV.
There is the possibility that the new Google TV HD DVRs actually cost less than Dish’s existing devices. It may also be the case that Dish wants to shift people from its existing TiVo compromised devices as swiftly as possible, since a court may tell the company to switch them all off in late 2010 or early 2011, due to the patent infringement lawsuit with TiVo. Perhaps it can offload some of this legal fallout onto Google, who knows.
And of course it is these subsidized devices where consumers will be most responsive and failure at Dish means abject failure, so keep a firm eye on this deal if you want to predict the fate of Google TV. If Dish can’t give it away, why would anyone pay for it?
What we think Google is hoping is that content companies, perhaps the major independent studios, will take to the Android Market in droves ‘ perhaps adding extra internet held video or using past online episodes of programs, to come up when one of their programs plays on the TV. So if you load perhaps a Lost App (Lost is from ABC, owned by Disney, who’s largest shareholder is Steve Jobs, so this is just an example), you might find shortcuts to the final episode with pointers to last weeks episode on your DVR, and the entire last season of Lost on some pay per view online site over the internet. (Pretty much the same could happen with a Google search, so we’re not sure why you’d bother with the app.)
Once this is common place among App providers , Google perhaps hopes to change the nature of how broadcasters use the internet, linking all of their content into one application on Android Market and pointing to all their existing legally licensed versions of video out on the internet.
It’s an idea, but not a very likely one. Instead Google needs to go to the offices of Viacom with a large check (recent revelations in the courtroom show that it offered $592 million to Viacom in the past but was asked for $700 million) and sort out the mess that is the law suit. It must change its practices at YouTube so that it takes the onus for locating pirated content away from the studios and takes it on itself.
It needs to do this with studios whether or not they are prepared to do advertising monetization deals with Google or not, with the exception that it vitally needs Viacom on board. It can then create a service to go over the Google TV product line, and then it will carve out enough of a business to replace the settlement payment, at some point down the line.
Failure to grasp this nettle risks something that is very bad for Google, and that is ceding first mover advantage to Apple, which is known to be planning something similar in the near future. And in the process it will ceded to Apple a huge amount of potential future internet advertising, which will be a very bad thing for Google. Apple will leverage such a failure by Google into a major threat to the heart of Google’s core revenues.