We all know by now that Google is up to something, perhaps big, with the launch of its Chromecast dongle-style screen-sharing device, but there is also a lot of confusion around the device capabilities, Google’s strategy and whether this is a truly disruptive device.
To find out more about the Chromcast strategy, Videonet‘s Justin Lebbon spoke with two digital entertainment industry experts, Analyst Steve Hawley and Consultant Mark Donnigan, who works with Dune HD on their set-top box business. Read the article on Videonet!
This week, The New York Times and The Wall Street Journal both reported on efforts being mounted by Google to launch an “Internet cable TV service” (an oxymoron). Joining Intel, Sony, Microsoft, Apple and others. Let’s look at them one at a time.
Intel is on the record as hoping to launch its own consumer Internet TV service, although in my opinion – even if they DO launch a service, which they insist they will – a service is not Intel’s true intention in that space. Instead, it’s another market-seeding effort – which Intel has done in the past with set-top box reference designs and software SDKs to drive that industry’s adoption of Intel processors. In other words, a retail TV service might be the icing on a different cake.
For years, Apple TV has been Apple’s entry into the streaming video player market space, and the TV vector of Apple’s device-content-software ecosystem. After many rumors have come and gone, Apple is now reportly “playing nice” in the pay TV industry sandbox. People forget that Apple has been on the side of Big Media for years. The same strategy worked for them with the music industry a decade ago. Also, most pay TV operators, premium pay TV programmers and TV networks offer apps designed to work on iPads, iPhones, and iPod Touch devices (and on the Mac via a Web browser). Steve Jobs became the largest shareholder of The Walt Disney Company when he sold Pixar to them. And now, Sky News, ESPN, HBO Go (among others) have launched apps designed expressly for Apple TV. Bottom line, Apple is both a friend and a friendly distribution channel; not a threat.
Then there are Sony and Microsoft. Over the past year, reports have had both of them taking runs of their own at being “Internet TV providers.” Sony’s effort sounds ambitious, but the rumor mill had gone quiet. They’d have some chance, by virtue that Sony is a media company (Sony Pictures) and the PlayStation is a content ecosystem; not just a game platform.
AT&T offered a special kit for Microsoft’s Xbox 360, to make it compatible with AT&T U-verse IPTV, although sales of that add-on have been suspended. Microsoft also offers branded apps from Comcast, Verizon and a number of TV programmers via Xbox Live. But Microsoft’s efforts to launch its own TV service by negotiating directly with TV programmers ran onto the rocks.
I was originally inspired to write this article because I started thinking how Google might have a better chance than any of these competitors. The TV networks are distrought over the fact that audience measurement for online video is not comprehensive, making advertisers leery of advertising in that medium. Meanwhile, 97% of Google’s revenue is from online advertising, so you’d think they’re onto something (See *** below). But a number of other TV programming distributors offer online platforms and already have relationships with the networks. Also, Google would expect a share of any ad revenue and is no friend of pay TV or broadband providers, particularly in cities where Google is building its own broadband service.
Not to mention that Google has taken other runs at the TV opportunity, most notably with Google TV, a noteworty technology that happened to be one of the great failures of high-tech marketing. Google TV cost Logitech millions of dollars, and their CEO his job. For its part, Google did nothing to correct the misperception that Google TV was a service, instead of the TV middleware that it actually was. [ Update July 26: Google has launched yet another TV device, Chromecast ]
So, here’s how I rank their chances at launching and sustaining an online TV service:
- Google: 0%, for having alienated the TV industry, which is highly resistant to change
- Microsoft: 0%, because they don’t instill confidence that they can succeed. Consider the recent launches of Windows 8, Xbox One, Surface, Windows Phone, and Microsoft’s exit of the IPTV middleware category (Mediaroom) only after becoming a leading supplier.
- Sony: 50% because they are working with TV industry players and because they are a content owner themselves. Also, they are in the process of revitalizing the Playstation ecosystem. [ Note: I previously was saying they had a 10% chance. ]
- Intel: 50%, because they appear to be trying to work within the parameters of the TV industry. If the retail service fails, it’s not the end because a service is only part of Intel’s true agenda despite what they say.
- Apple: 100% if they collaborate with the pay TV industry. Apple’s ecosystem is the broadest and deepest (albeit sans games). Also, Apple gets credit for having saved the music distribution industry’s bacon.
Samsung is a huge wild-card here. They have a device and in-home distribution product ecosystem and have been successful in extending Android into something useful, but Samsung has not announced any intentions of their own, other than partnering with content companies and distributors (pay TV, Redbox Instant and a few others)…
*** I’ve begun to think of Google Search, Android and Chrome as ad-malware. But that’s a whole ‘nother rant, for the next episode of “Why can’t I download that Android app without accepting its terms to track my location and phone usage?” I’m saying to myself “Get over it or switch!” and from my tone, you might guess my decision.
We all replace our mobile phones and computers every few years, not to mention our cars and many other high-ticket items in our lives. But TVs are different. They’re supposed to last for ten or twenty years, aren’t they? But our first-generation Google TV device has reached its half-life. Read the entire article on Telecompetitor!
Everything seemed so tidy and settled six months ago. A growing new conventional wisdom acknowledged that pay TV is, in fact, not only moving to Internet protocol, but also, that the titans of pay TV had all but won the day over ‘Web video.’ This sense of complacency was disrupted when Google made a trio of noteworthy announcements at its annual Google I/O developer conference last week…
This morning, we were greeted with the announcement that Google – a company that built its business on top of the Internet, search and advertising – would be buying Motorola Mobility (MMI), the mobile smartphone, TV set-top box and home networking portion of Motorola that became a stand-alone company at the beginning of 2011.
There is little doubt as to the strategic and product-level advantages that this combination would give to both parties, should the acquisition be approved by shareholders and regulators. Strategically, it’s about intellectual property, as stated in Google’s afore-linked press release – with the un-said subtext that it will probably give pause to potential adversaries before becoming embroiled in the kinds of law suits that have gone back and forth between Apple and HTC, Apple and Samsung, and others.
Product-wise, in addition to the obvious synergies between Google (Android) and Motorola in the mobile smartphone (Droid) and tablet (Xoom) device categories, Motorola benefits by having an opportunity to make Google’s industry benchmark search technology native within all of its products. Search has been a long time focus of Motorola, on the TV infrastructure side. We’ll see over time whether or not this drives non-Motorola Android-based smartphone makers into the clutches of Microsoft Windows Phone.
Google potentially benefits in that MMI has the industry presence to help move Google’s Google TV technology from something of a pariah status within the TV industry into the industry mainstream. This would give Google TV a better opportunity to receive a broader test in the marketplace, through Tier-1 pay TV operators that buy from Motorola. With Motorola’s imprimatur, TV service providers might be more apt to test and adopt it (content owners willing). Conversely, if Google TV were to receive more of an industry blessing as a result, Motorola’s value proposition could be strengthened.
There are some “devil in the details” things that hopefully will be ironed out. For example, a Google-owned Motorola Mobility will have two IP television security solutions for conditional access and encryption: Google’s Widevine and Motorola’s SecureMedia. Will one of them “win”? My belief is that they could be complementary, and not an either-or situation, because Widevine shifted its focus to connected consumer electronics devices (e.g. smart TVs and other video-capable devices) a few years ago. Of course SecureMedia is going in the ‘multi-screen’ direction too, so we’ll see.
Another interesting area will be how the two companies leverage one anothers’ advertising technologies. MMI has an investment into Black Arrow, an advanced advertising specialist; and has an entire product line (Medios) devoted to the merchandizing of content on any screen.
It’s the cultural fit that’s less certain. Can the acquir-or handle the business that the acquir-ee brings? Will the acquir-ee bring some grown-up discipline to the acquir-or? In a way, I liken today’s Google to the Cisco of years past. Google’s acquisition binge of recent years resembles Cisco’s of 10-15 years ago. By its own admission, Cisco lost some of its focus in the process.
In retrospect, Cisco has been, and will remain, a network infrastructure provider (just as, at the end of the day, Intel will always be a chip company). Strategically, Cisco’s acquisition of one of Motorola’s biggest TV industry competitors – video infrastructure and set-top box supplier Scientific-Atlanta – a few years back made sense for Cisco, since video helps Cisco justify its network offerings. But culturally, Cisco has never truly become a “video” company, even with the company’s launch of Videoscape, which purports to unify large subcontinents of Cisco under a video solutions banner.
I ask myself: why did Cisco (S-A) lose its momentum in its video business, which has resulted in Cisco selling off a set-top factory, not to mention big layoffs, and not to mention Cisco’s abrupt shut-down of the once-hugely-popular Flip video business. Will the same thing happen to Motorola Mobility in a few years?
Or we can go off on another tangent and ask whether – by having bought its way into being Nokia’s primary smartphone OS supplier – Microsoft will have brought both Windows Phone and Nokia back from the brink – just as Android breathed new life into MMI’s mobile phones a couple of years back. Or, we can ask whether Apple feels in the slightest way threatened by any of this. Sequentially, too early to tell, and they’d never admit it if it did. But Google’s effect on Motorola Mobility, and vice versa, is not tangent to the conversation at all.
Business models for network TV are in the midst of fundamental change right now. The networks themselves are forcing some of the changes, and some changes will be forced on them.
Recent actions by Fox are emblematic of the changes being forced by the networks, who hope to create a second revenue stream. The first revenue stream has been the traditional advertising revenue stream. The second, which has been enjoyed by “cable” programmers (e.g. HBO, Discovery, ESPN, etc) for years, but has not been part of revenue stream for “network television,” would be to charge a monthly fee per pay TV subscriber per month. In recent months, Fox shut down their feed to DISH Network and to Cablevision, and there have been other shutdowns for this reason as well. In the end, Fox apparently will receive some kind of compensation because those subscribers again receive Fox, but the terms with DISH and with Cablevision were not made public.
I’ve been watching Google’s online forum for Google TV, and last week I began to post there. I continued to think about one of my posts, which then became this post on my own blog on December 17th. In response, one of the Google forum members asked: do local affiliates participate in online programming in any way? I didn’t think so, but I may simply be unaware. So I started asking around and in fact, the answer is currently “No.”
Technically, it wouldn’t be difficult to do. If an online viewer’s location can be pinpointed down to IP address by the access provider, the information could conceivably be conveyed to the TV network and then matched to the local market’s network affiliate, and even be used to enable online local ad-insertion. Location-based services are already enabled in mobile applications, and by IPTV operators (e.g. AT&T U-verse), but it apparently isn’t yet part of online TV.
It’s ironic, because the TV networks aren’t passing any of today’s online TV ad revenue back to their local network affiliates, enabling online viewers to watch the local affiliates’ programming, or enabling local ad placements – even though IP technology and location-based services make this possible technically.
And the story continues to unfold: according to a story in today’s New York Times (December 20 2010), Google has asked its partners to pull their Google TV products from CES (the International Consumer Electronics Show) in early January. Ostensibly, it’s to “refine” the software. Still I wonder – has the fact that the major TV networks are blocking their programming from Google TV caused Google to blink?
Earlier I mentioned that some changes will be forced on the TV networks. One of those is the emergence of Apps – which are likely to become the equivalent of TV channels, and may be the catalyst that finally forces the pay TV programmers to offer a-la-carte programming. Some will be paid, some free, some standalone and some available only via aggregators such as Hulu, Netflix, Boxee, and yes, Google TV.
The annual TelcoTV conference is one of the premier events in the IPTV industry. As a conference with a telecom heritage (not streaming media or broadcast), TelcoTV’s focus has been IPTV (pay TV over managed IP access networks) and not IP Video (video on a best-effort basis). Many of the attendees are Telcos that looked at video as an engineering problem first, and by the way, also an answer to the competitive threat posed by cable – rather than the other way around.
In November, I had the privilege of moderating “Capitalizing on the OTT Opportunity,” the closing panel discussion of Day 1. On my panel were executives of two Tier-1 pay TV providers: Verizon’s FiOS TV and DISH Network. There were also the head marketing person from Netgem, a French provider of hybrid IP-broadcast set-tops and middleware, and an executive of Dailymotion, a content provider.
The basic premise of the panel session was to discuss the impact of Internet-delivered video on pay TV. In a few words, the impact will be very positive in the long run and there are lots of reasons why. But at the moment, everyone in the industry is blundering about and fearing for their own safety and survival, like spelunkers in a dark cave.
Verizon was the first large US-based service provider to deploy and scale an IPTV service (technically, a hybrid solution using IP for on-demand and cable TV technology for live TV). DISH Network is the first pay TV operator to deploy Google TV. Netgem has no U.S. presence yet, but has deployments in Europe – including one of the largest TV service providers in France, SFR (which operates Neuf Cegetel) which has more than 3 million IPTV subscribers – as well as Telstra, the incumbent Telco in Australia. Dailymotion’s video content is found on FiOS TV, Google TV, and many other platforms. So the panelists could all speak from personal and company experience.
I wrote an early analysis on Google TV, released in August (for which I’m about to release an update). So I was very curious about the actual product, and had it installed the week before TelcoTV so I could speak about it intelligently as the moderator.
So what was my verdict? For the most part, I have been very impressed (with the integration and the user experience), but also disappointed (for lack of content). However, I have every confidence that the early disappointments will be addressed and that, as a platform, Google TV will ultimately be seen as the game-changer it is. I have three reasons for this assessment.
1) The content owners’ blockade against Google TV is likely to be temporary
Because they don’t want to disrupt their long-established business models, the major American TV networks have blocked their content from being accessible by Google TV over the Internet. Network TV is largely ad driven, and has been since its very early days. So is Google: 98% of GOOG’s revenue is from advertising. So it’s a tug-of-war over ad dollars. The major networks and Hulu are blocking Google TV because no ad revenue sharing deals have been cut. Once they resolve their business issues, the content will flow. It’s as simple as that.
The TV content that Comcast distributes online via its Xfinity TV online service won’t work on Google TV because it uses Move Networks codecs (and in 2011, Microsoft Silverlight), which current Google TV-enabled devices can’t decode.
Also, Comcast seems to see Google TV as competition – in some ways correctly and in some ways erroneously. Comcast is reported to be readying its own Internet TV device, code named XCalibur. So, in that sense, yes, the two devices would be competing over online video ad dollars. But Comcast seems to be ignoring the potential of Google TV as a distribution medium that they can leverage, which is the potential that DISH saw. As a sidebar, if, by limiting the types of Internet-delivered content viewable by XCalibur, Comcast is acting as a gatekeeper, it is violating the “open networks” and “open services” tenets of Net Neutrality – another reason why the FCC should regain its backbone, but that’s another story.
2) Industry opinion leaders were nonplussed with Google TV, but impressions will change once it’s understood for what it is
Many in the industry punditocracy have said that Google TV’s success hinges on the availability of programming. True, but that’s only part of the story and is (in my opinion) temporary. They neglect the technology and service integration side of the discussion.
The only Google TV launch partner to date that has implemented the full vision of Google TV is DISH Network (with Logitech and with Sony, although I only have tried DISH with the Logitech Revue). This means that DISH’s TV DVR and EPG metadata are handed off to the Google TV search function, so you see a search result that includes them. That’s real TV through DISH Network, not just Web videos from YouTube (which also appear in the search result).
The other part of the integration is control of the set-top box. This means that DISH had to write software that ties their set-top box, the Revue, and Google TV via their respective APIs. If a program turns up in the search result and you want to DVR it, you press the DVR button on the Logitech Revue keyboard (or the regular DISH remote) and that’s it.
3) Google TV is not being merchandised or positioned correctly at retail.
If you go into a Sony Style store or a Best Buy (both were Google TV launch partners), you’ll find Google TV set up for demonstration. But in my experiences, both were set up with DirecTV, which hasn’t done the Google TV integration. Also, most sales people in consumer electronics shops are not subject matter experts, or trained on Google TV.
When the Sony person told me that he happened to be the designated “go-to” person for Google TV, I thought “Great, you don’t see that too often anymore! I got the right guy.” So I confidently picked up the remote and searched for a popular movie that I know is on pay TV right now. When I asked whether a Google TV search result would include TV programs and movies, he said “yes.” What a let-down when the only search results were the movie’s Web site, a Wikipedia entry, and some trailer videos on YouTube. No “real” TV. I guess he thought that, because the content was tied with something that’s on TV now, that it qualified as “TV.” I knew better, and more importantly, consumers do too.
The other disappointment was that the Sony products use this little game-controller-like remote control, and you have to press a trigger to use the keyboard. Reminiscent of the IBM PC Junior of the early 1980s. Because the Google TV integration has not been done with DirecTV, the retail experience quickly got into a mode where I was using the little mouse controller on the Sony remote. To be charitable, I’ll just say that this violates the most basic principles of TV user interface design 101, and did not pass the 57-year-old curmudgeon test.
But Google TV, as a technology and as a tool-set – and as a concept that addresses new expectations about what TV should be – is a really good effort. What it needs is consumer awareness that rises above noise-level. If Google has the wherewithal to give away 10,000 Logitech Revues to developers, and now, 100 free 46″ HDTVs to consumers, why not deploy their minions to Best Buy and Sony Style stores to make sure it’s set up with DISH and to demonstrate it correctly?
I reiterate that DISH did a good job with it. Yes, it’s a little rough around the edges – as the old adage says, “beware of version dot-oh software.” We’ll see if the updates shipped by Google and Logitech in mid-December made a difference. I am told that DISH is working on some tweaks also. Hopefully, at some point, the technology will be refined sufficiently so it doesn’t require a companion device like the Revue.
Give it time. Anyone in TelcoTV circles will tell you that it also took years for the content owners to trust IPTV.
My thanks to the Editor, Jamie Beach. Nicely done!
On August 15, I released my analysis of Google TV. It’s available for sale via the Publications page on my Web site.
This week, Carol Wilson of Light Reading interviewed me and wrote a story about the report and my positions on Google TV – in general terms. I believe that Google TV will be fighting an uphill battle right from the get-go, and I have lots of advice for broadband operators, Telcos and ISPs that think Google TV is a shortcut to video services.
Thanks for the great write-up, Carol!
The way I understand Net (Internet) Neutrality, it’s pretty simple. Internet content should be able to go anywhere, and no commercial interest or government agency should be allowed to interfere with the free flow of information. Why is Net Neutrality so difficult?
The FCC has been ruminating over Net Neutrality for years now. In recent weeks, they’ve hosted closed-door meetings with major commercial broadband service providers. This week Google and Verizon came down from the mountain with a seven point proposal for Net Neutrality, called A Joint Policy Proposal for an Open Internet. Meanwhile, the FCC’s own talks were dissolved. Again, why is Net Neutrality so difficult?
Historically, Google has always championed Net Neutrality. Their four principles – Open Networks, Open Applications, Open Services and Open Devices – remain important guiding principles of the Internet. This week’s seven point proposal encapsulates these four, add two new ones proposed in the National Broadband Plan and by the FCC, plus one more. Let’s review them at them one at a time
First, make open principles enforcable (good!). Second, add an antidiscrimination principle (good!). Third, force service providers to explain their services clearly (good!) Fourth, give the FCC a clear mandate to regulate the Internet (which is currently in question, due to the the court ruling allowing Comcast to regulate what is on its private network, contradicting the FCC position that all Internet traffic be treated equally – so, good!). Fifth, allow for differentiated services (which promotes value added services – good, and it’s OK if some of them are paid or intended just for vertical markets). The seventh one favors extending the Universal Service Fund to the Internet (good).
The sixth proposal is troublesome, right from the get-go: “…we recognize that wireless broadband is different…” Think about it. Connectivity, to most people, is like water; people don’t think so much about how they are connected anymore. The only reason that wireless and wireline are being positioned differently is commercial, for bandwidth reasons – which LTE and WiMAX are poised to solve.
I will make no secret that I am a Net Neutrality advocate, but I’m not black-and-white about it. For example, service providers should be able to charge for premium content and that the activists are blind to this on purpose. But not be allowed, like Comcast, to bar traffic that they don’t like. Or like wireless providers, be given a “pass” essentially not to enforce Net Neutrality at all. Bandwidth is a temporary limitation in the long term, and Net Neutrality shouldn’t be confused with protection of intellectual property (pirated video distributed over P2P), which is a separate issue.
It all comes down to balancing corporate interests with the public interest, and those interests are not always aligned (shall we say politely). With Google’s Android and Chrome software being embedded in so many communications-savvy smart devices, and with Google TV on the horizon, Google is increasingly siding with its profit motive and doesn’t want to upset the media industry ecosystem. Especially when 97% of Google’s revenue comes from advertising.
Especially when Verizon’s latest Android-based smartphones are so successful, and especially since Motorola is reportedly building an iPad-like Android-based tablet for Verizon FiOS TV. No wonder Google appears to be compromising, and now I start to see why Net Neutrality is so difficult. Google has transformed from being a pure Internet company, into a platform for paid content.
Give the Google-Verizon proposal a few points for effort, but make Google stay after school to write on the board a thousand times: “I shall be true to my principles” and “I shall do no evil.” Hopefully, the FCC regains adequate spine to ignore clause number six.