Google TV the beginning of the end for satellite and cable operators?

By May 21, 2010Google, TV

As you might have seen Google announced their new Google TV product yesterday which makes the full web available on your TV through software that will either be directly built into the TV or via a set top box (if you want it on your existing TV you will have to go the set top box route).  All you need is a wifi connection.  Note that this is an alternative to connecting your TV up to your laptop and using it as a big screen, and they have made some UI innovations to reflect that – e.g. search is more video focused.

There is a good summary of what it is and what it isn’t on Search Engine Land.  For me the real kicker comes about half way down their post:

Will it replace cable TV?

This is an interesting question to consider and one that will take time to answer. Users won’t need a cable TV subscription (though they will need WiFi in the home) to access Google TV. So it’s at least possible that the web content and video, Netflix and Hulu that GTV offers via the internet could well substitute for a cable subscription.

For me this is one of the biggest questions facing the internet and TV worlds over the next couple of years.  If we see an unbundling of access and content subscriptions there will be massive implications for companies like Sky and Virgin in the UK and Comcast in the US.  And I think we will – because the consumer proposition is much better. 

The video below from Google does a good job at explaining some of the reasons why open web on the TV will be better – their main points are better interface (full search, faster access to your favourite shows) and more convenience (on demand is better than scheduled).  These are two great points, and ones that traditional pay TV companies will struggle to compete on – their businesses are built around channels and scheduled TV, and the UIs on their set top boxes are notoriously inflexible and hard to update (just think about how little innovation we’ve seen in this area – e.g. there is still no search).

Beyond the UI price could be an important driver, in theory at least. An unbundled model could (should?) turn out to be much more compelling from a price point of view.  Currently most of us take expensive bundles of content because it is the only way to get the one or two things we want – e.g. I pay for access to all of Sky Football just so I can get Chelsea – if that is unbundled and the middle man (pay TV company) is bypassed I could pay less and a greater amount could go to Chelsea.  That would be better for everyone in the value chain except the cable companies. 

Whether this pans out in practice, and how quickly depends on the appetite of rights holders to try and break free and the size of audience available on open platforms, as well as the effectiveness of the pay TV companies in fighting a rearguard action to preserve the status quo.  Tellingly with reference to this last point Google has so far refused to comment on pricing.

To close, it is worth remembering that a truly open web TV model doesn’t need anybody’s software running in the TV or set top box.  The logic above works just as well if the TV is operating as a monitor to a web connected PC (embedded or not).  It is better for Google if they can stick themselves in the middle, but maybe not better for everyone else. 

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  • I think your last point re other Over The Top services is going to be interesting – Google, Apple etc will try and AOL_ify the Web Video experience by controlling the Web to TV value chain, but the Good Enoughs are already plentiful so its a hard road to climb

    My initial value chain here http://bit.ly/d4mi6b

  • truthflux

    Interestingly, in the UK, if you watched only on-demand TV and didn't hook up an aerial, you wouldn't technically need a TV license. That's about £150 a year saved on top of your Sky/Virgin subscription.

  • I think Sports is the exception to your argument. The main issue is how football rights are negotiated. In the UK, live screening of rights to football matches are negotiated by the FA on behalf of all clubs. The money from the sale of the different rights is then allocated to the individual clubs. The main argument for this model has been that the FA (or the football clubs in total) would be able to generate more revenue for all clubs, rather than a series of bi-lateral deals.Or in other words the strong clubs subsidise the weaker ones! In order for you to watch Chelsea without having to subscribe to all of Sky Football, there would have to be a fundamental re-ordering of the Football rights industry.

    I still think there significant usability issues that still remain: today, I turn on my TV and it works. I don't have to worry about different forms of encryption, dropped signals, interference, SSID, thick walls, multi-story houses, etc –all are factors in the wi-fi experience. The PC/web world is still not plug and play. And, to be honest, I really don't want to have to reboot my PC during the last 5 minutes of 24! I still struggle to get all of the different boxes that I might have working together! Remember, despite the proliferation of DVR's and the ability to “time shift” the vast majority of TV viewing is live or near live (75% within 24 hours and almost 50% within 1-2 hrs).

    Finally, there is a difference between access, distribution and content ownership. Virgin Media provides access and distributes content. But, very little of that content is actually owned by Virgin nor is it exclusive. Therefore, the economics for Virgin Media different significantly from Sky who own both the access, provide distribution and also own the rights to the original content.

  • Thanks Kerry. Lots of points here, but to take two:
    – chelsea could choose to opt out of the collective bargaining, or the Premier League could manage an unbundled web presence for all the clubs – this sort of restructuring has happened to an extent in Italy already
    – the connectivity issues you describe are very real today, but are getting better all the time

  • Good point

  • damonoldcorn

    Yes this is the way mlb.com work with the Baseball mainly US centric, they own all the content and make about $500m per year putting it out online on a subscription basis. The days of channels on terrestial TV are numbered but as usual will take 5/10 years to disappear completely given the depth of legacy equipment and apathy in market. It is the reason the team at StuffedAnimalsMedia are putting entertainment content together from scratch and like the old Hollywood studio model control the creation, direction, global distribution and monetisation on digital and ignoring the traditional broadcast channels – this model sometimes called digiwood. The word is the NFL are buying back in all their content rights as the contracts mature to eventually do the same globally. If you ever wanted a disruptive globally scalable opportunity this has got to be one of the spaces to play in.

  • Henry

    Couple of related issues I've been thinking about here:

    1) to be able to stream at a definition not horrific for all our swanky 1080p televisions requires some serious bandwidth – I know things are improving in this regard, but I wonder what real broadband connection is needed to make this a similar proposition to Sky / Cable
    2) back to the bandwidth effect – I wonder how contended lines would be affected by everyone tuning in to watch Eastenders (or Oprah or whatever the US equivalent is) at the same time – similar to the way the national grid in the uk surges as people put their kettle on during ad breaks

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  • Two good questions, with no definitive answers yet – to my knowledge anyway.

    My opinion:

    – people will sacrifice picture quality for convenience/price (the percentage of HD TV owners who bother to pay for an HD service is sueprisingly low, Virgin have started giving theirs away)
    – network operators are investing in bandwidth and clever network solutions to address contention, but it could well become a big problem – at which point we will start paying more for better quality connections, something that happens a little at the moment

  • I think this something that will take long time to become mainstream. Surely there are some of us who are not technically challenged that will be willing to be the first to use it. However I believe there are a few stumbling blocks for widespread adoption:

    1) If more and more people are using their broadband connection then more improvements in speed and quality will be required. This will mean more investment from broadband companies but also higher costs for decent Internet connections.

    2) Setting up a Wi-fi is not without it's problems and even if someone else sets it up for you you may still have problem with connectivity. And certainly I would prefer a TV service where I don't need an IT technician 24×7 to allow me to watch Tv.

    Personally I like to use the on demand services such as BBC's Iplayer and ITV's Player. I have also used the TV recording devices which I have found very helpful and easy to use.

    I believe the TV as we know it will be here for a long time, probably for at least another 10 years. All these other services will be used as an added bonus, by people who have a good understanding of technology or are feeling adventurous and want to be involved with this new technology.

  • The initiatives from Google and now Sony may make the tecnical issues go away sooner than you think.

  • net remote

    sky rules because of content, content rules because it is what the consumer demands. Google and the likes piggy back of programming produced by networks and past librarys. Only new and creative content develped in house for a new media such as net.tv (google) can ever displace comcast/sky. They have the customers & their bank accounts, googles just fishing?.
    Having a profit making search engine earn for you, granted v8 size engine, does not mean much when you wish to transfer that kind of day to day managed buisness to a more creative media.
    They may wish to buy in (sky/comcast) or AOL/WB
    Google fan yes or no ?

  • Content is king. The interesting question is whether Comcast etc can keep control of their content bundles or whether enough leaks out to alternative providers like Hulu and Netflix for consumers to start ditching their cable provider.

    If it does, and I think it is inevitable, then Google will at minimum play an important role in search and discovery, and maybe more, depending on the success of Google TV.

  • fishing_box

    The major telco in my area is upgrading its twsited pair network to fiber optics. That means everybody, or almost, will get fiber optics to their home for voice and DSL.
    On top of this, the telco is throwing in fiber optics tv.
    I think that before Google succeeds with its internet on tv, there will be plenty of competition on the technologies.
    And by the way, Google is not a content provider. Google's proposition might completely reorganize the right holders and the content creation industry.

  • It will be interesting to see how it pans out, you are dead right, and the value chain will most probably end up looking very different from how it looks today. My instinct, though, is that cable companies will struggle to transition their content businesses to delivery over broadband.