Commentary
Google TV Is No Short-Term Play
- by Michael Kokernak , October 27, 2010
There are all these buckets we try to sort video consumption into that don't make any sense anymore. Forward-looking financial projections are practically meaningless given the jarring speed by which new electronic devices are flooding the consumer marketplace. Partnerships, formed to target television, seem to be forged overnight. For instance Google, putting its hooks inside the manufacturing arm of Sony, today has a strong partner helping get Google Chrome into the living room.
I have to scratch my head as I sit in front of my 27" iMac when I hear industry analysts say consumers don't want to use the Internet on TV. My iMac, for all practical purposes, is a TV! One report stated that consumers don't find value in having their televisions connected to the Internet. This might be true today, but devices first need to get sold and installed prior to consumers getting hooked on an application market. Google, in my opinion, is going to invest heavily in getting the Chrome browser onto nearly every television set, even without the cooperation of the broadcast networks.
Typically, when the topic of Internet disruption comes up, there is a lot of doom and gloom around the notion that local broadcasters are going to fall first. There is no denying that the future will be a device- and screen-centric world all pulling data from a cloud. But the definition of a cloud, to me, could be anything -- it isn't limited to the Internet. It could be a cable company's data center, Internet provider, spectrum, or a DBS satellite downlink. Let's not fool ourselves, consumers are sophisticated enough now that they will seek out devices for specific purposes tied to any appropriate cloud.
Google TV's roadblock by ABC, CBS, and NBC (who all encrypted their content) makes for great gamesmanship. We all know that devices, including Google TV, are here to support some level of cloud viewership. Those in doubt should visit Best Buy and walk the rows of Internet-enabled devices. The big battles around content ownership across all platforms finally seem to be upon us. For many of the interactive television providers this might be an important catalyst to ignite a long-simmering market.
As a byproduct of cloud computing, the long-term value, and purpose, of software has changed dramatically these past couple of years. Today you can get many programs for free or at low cost on the Internet. Consumers are able to bookmark into their browser bar (like Google Chrome) all sorts of free programs -- from Mint.com, Google Apps, Xfinity, Netflix, RunKeeper, to Linked In. These programs, many replacing Microsoft products, have become little silos of information in themselves, with the user's attention focused on a very narrow output per application.
I imagine the financial strength of Google AdWords will be weakened by all this cloud-based software over time. These applications probably find little financial reward from adding text ads into their user interfaces. As the application market continues to splinter this can't be good for Google's bread and butter search business. This is why I think Google TV is so important, as it provides Google with access to an untapped major revenue source. No surprise, then, that Nielsen Media Research plans to bring GRPs to Internet measurement.
When I think about the biggest challenge facing the TV industry I think about a scene from "Raiders of the Lost Ark." It's where Harrison Ford tries to steal the Golden Idol by swapping it with that bag of sand on that booby-trapped pillar. It's as if that bag of sand represents the technical process of upgrading the "cash registers" (inside the broadcast origination centers) that keep commercial insertions happening and advertiser invoices humming along.
The entrenched positions of these billing systems -- which should be upgraded for interactive (lean- forward) technologies -- for me are at the crux of why the industry has so much apprehension moving beyond pure audience ratings. With billings rising across the board for television, "if ain't broke, don't fix it" might be the logical response to delaying critical innovation during this lucrative election season.
Google TV, however, needs television content for its future more than TV needs Google. This idea that there is some difference between Internet and multichannel providers is dated. The flare-up among Google and the major three networks proves the battle for content just got real. Everything is up for grabs. May the best user interface win. Those broadcasters (and cablers) that swallow the bitter pill, while times are good, and figure out how to upgrade their billing systems, will be positioned correctly as TV turns toward a "lean forward" mode.
Your definition of "the cloud" beyond the internet and including those cable guys is very insightful. Assuming that all old media will fall down as the cloud passes is silly.
"I have to scratch my head as I sit in front of my 27" iMac when I hear industry analysts say consumers don't want to use the Internet on TV. My iMac, for all practical purposes, is a TV!"
The problem with this line of thinking is that it applies only to people who watch TV alone. The last thing my family wants me to do is pop-up the TV guide or Netflix or IMDb or whatever during a show. In a shared viewing environment, TV may use an internet pipe, but that doesn't mean your family wants to watch you surf the web.
First there was radio - there we those that said TV would kill radio, it didn't. There were those that said cable would kill TV, it didn't. Now the question is "Will IT enabled devices kill the networks" - no, but what will happen is an end to the top down distribution established by networks. And seriously, are the "Big Three" so blind as to think that by them encrypting their content that it won't appear on Google TV? Go to YouTube and do a search on "Survivor" - how many of these episodes do you think were put there by the network? All media that can be digitized has or will be shortly. BTW - 27 inch iMac? iMoonie.
I think it is worth thinking about what model of selection will replace the current top-down model of distribution with its "gatekeepers" acting as arbiters of taste.
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Right now, "someone else" is deciding what gets produced, broadcast, rerun, etc. In the living room we sit down and view the condensed results of that "someone else" and their decision tree.
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With internet TV, that decision tree done by someone else, now becomes the person with the remote in their hand, sitting in the Lazy Boy with the family on the couch. What does that remote control-yielding person look at when they want to passively channel surf?
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I think it is likely that while the top-down distribution goes away, it will be replaced by nearly the same thing, as entities pay big dollars to be prominently placed "above the crease" in whatever object wins the battle of the next TV Guide.
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To be clear, I find it reasonable to think that TV viewers in the future will still want EASY DISCOVERY. Who wants to sit and stare at endless screens of menus trying to make a decision on what to watch? The first few shows at the top of that menu will get most of the attention and most of the viewers. Someone will pay top dollar to be placed at the top of that menu. Everyone else gets the crumbs. Not that different from the model we currently enjoy.