In an earlier article, I talked about why the nomenclature for GoogleTV and AppleTV is ill-conceived, and why Google and Apple are doing the marketing of these products a disservice. At the same time, the opportunity to bring Internet and digital media to the largest screen in the home is immense (as I wrote in a recent report I co-authored for the Yankee Group). The nomenclature, the product development and marketing approaches demonstrate that neither company has qualified this opportunity sufficiently.
For the most part, GoogleTV is a bit of a joke in the industry given its lackluster success and Google's mishandling of its launch at CES 2011. Similarly, Steve Jobs has admitted that, till recently, AppleTV was a hobby, and I believe he is being sincere in saying so. Actually, I think both GoogleTV and Apple TV are still hobbies (read science projects) for these companies, and it is not entirely surprising.
The market for these products is not realized yet. What market does exist is marginally attractive in the larger scheme of things and is already full of scrappy price competitive players like Roku, NetGear, and others. Today, perhaps the most appealing Internet video experience is from NetFlix, who reportedly accounts for 20% of Internet bandwidth consumption during peak hours and 61% of all full length movie streams. In large part, this experience is successful because it started as an extension of an existing online service, a not insignificant amount of content is available on Netflix, and it is ridiculously inexpensive, both in the equipment required and the subscription service. (There is an interesting analysis to be done on to what extent this last part is sustainable and what the implications are for network service providers, and therefore consumers, when adoption grows further. Will consumers expect ever better streaming quality and more rapid content refresh and what does that mean for Netflix?)
In any event, Internet video today is, by definition, a disruptive video experience -- i.e., lower quality and choice at a lower price -- compared to what is available on pay TV programming. For those that want to argue about the infinite content choices that come with the Internet, let's just say that with Netflix and Hulu as the fastest growing streaming sites it seems pretty clear what's going on with consumer demand.
For now, consumers don't know what they're missing because they haven't seen it before. Today, by connecting the biggest screen in the house to the Internet consumers are getting the typical television-like experience for most part. Changing that is the big opportunity for either or both Google and Apple, redefining the category similar to what Apple did for music.
I would like to think that if the opportunity was ripe for the picking for Google and Apple they would have more well-conceived offerings. Today, there are a lot of low hanging fruit and there are lots of companies having a fine time picking at it. It will not be much longer before the shakeout and consolidation happens, just as, about a decade ago, the home networking market surged in numbers of vendors and quickly settled within a matter of two or three years. That's Moore's law at work among other things.
That is when the real opportunity will emerge for big plays more suited to the Googles and Apples of the world. Sure, a few different things could happen including some existing players getting well ahead of the pack and changing the game. For example, NetFlix could conceivably set the mold for the next generation of a media company and television experience. In that case, "Netflix TV" might become the one to beat. Or it may not.
Another set of interesting developments are the permutations around what I call "tethered experiences," particularly with the iPAD. Such solutions may well preempt quantum leap solutions like Google TV is intended to be, benefiting incumbent PayTV operators the most if they are quick enough to capitalize on the opportunity. Solutions from companies like IntoNow, which Yahoo recently acquired, and other things going on with auto content recognition (using watermarking and fingerprinting solutions to synchronize IP data with broadcast programming) may well create a more seamless and desirable adoption path for the mass market where traditional television programming is augmented with tethered wireless devices.
In the scheme of things, the Smart TV and Internet TV phenomenon seems a safe harbor to a lot of companies (and even industries) who are getting upended by the forces of change. These include television set and Blu-ray manufacturers, and even NetFlix with its traditional physical-media business. It is not surprising to see the surge of products and services getting launched, not a few of which are ill conceived. Neither Google nor Apple need this safe harbor as a matter of survival, nor is the market ready for them. If anything, the market for portable and mobile devices and applications of both these companies far exceeds the near term prospects for either Google TV or Apple TV. I'll discuss this further in an upcoming article. It would, however, be ironic if their respective tablet and mobile device formats end up as the next definitive evolution of television viewing despite their own TV initiatives, wouldn't it?
Some of my family members already consumer more video/tv on mobile and tablets than traditional living room tv.
While this comes across as insightful to many readers, this analysis was offered several years ago by TDG. The fact that it has only now become pop insight is disappointing, but not at all surprising.
For analysts (especially those writing reports for firms like Yankee), the idea is to be several years ahead of curve, not merely commenting on current events but predicted accurately how this will play out years ahead of time.
Would you care to share this report with the readers?
I for one am curious to see how the topic of Google TV was addressed a few years ago given that it was announced 12 months ago and was released only last Fall.
Any bets on Apple buying Netflix? :) I actually think there is s bigger pay here with home media serving machines, netflix, home videos, homeshare music, etc...but, needing the apple TV little box for streaming. Want proof? Just try to find a home media server and set it up......ack...painful!
Tablets and smart phones that can toss video content on the fly to TVs only need GoogleTV & AppleTV to negotiate the connection. Once a standard like AirPlay becomes as ubiquitous on TVs or cable boxes as Dolby and THX, hobbled media centers will be nothing but what Apple has acknowledged as a passing hobby. The current generation of tablets and smart phones provide infinitely better user experiences and provide utility that is at least an order of magnitude greater.
IMHO the only thing that might breathe another year or two into these set top media centers is to remove the software boundaries and bring these devices into their current third-party app markets. Given the better than expected sales numbers for AppleTV2, it would seem an easy decision for Apple to do exactly this when iOS 5 lands.
Sam - AppleTV has been out for a few years, and GoogleTV per se was not the object of my response. My point is that TDG has been writing on the subject of OTT platforms for more than five years, pointing out many of the same concerns you express in your article...but several years ago. This is not to say you are off base in your analysis, only that you are a bit late to the conversation.
If you are unaware of TDG's long-standing analysis on these subjects, simply search "Colin Dixon." He's been advising clients in the OTT space for more than five years.
Michael - I agree this conversation has been going on for some time. For those of us in the industry, the genesis was more like 10 or 12 years ago. This post is relevant today because we're at an inflexion point in the industry. In some important ways the conversation is just getting started.
Ron - Your point is well taken. Intermediate devices are a a pain. Media adapters never took off because of their complexity and limited utility.
Steven - I agree that some standardization of a wireless point to point video link between disparate devices would be a huge boon to the ecosystem. (Some proprietary solutions already exist.) Ideally no intermediate negotiation devices should be necessary, but these things don’t always evolve along linear paths.