Google CEO Schmidt stands behind Google TV: 'We'll get through this one;' but will it thrive?

Google CEO Eric Schmidt this week said he's "quite confident we'll get through this one because the technology is so powerful." The "this one" he's referring to is the broadcast industry's near total rejection of Google TV, as every one of the major networks--as well as content aggregator Hulu--has decided to block the video on their websites from playing on Google TV devices. The technology he refers to is, of course, Google TV and its promise to make TV smart.

"They've accused us of trying to make a dumb TV smart," he said at the Web 2.0 conference in San Francisco this week. "Yes, we're guilty of that. There's a fear that this enormous revenue stream is somehow going to be affected by all this Internet content... we don't want to create a situation where revenue goes to zero. TV is a big business, and... there are lots of new revenue sources there."

Hollywood's shunning of Google TV has left the fledgling service with a pretty watered-down content mix, at least as far as premium content is concerned. And that's tough, especially now, as consumers enter the holiday buying season. And, especially when on the shelf right next to the $300 Logitech Revue and its Google TV platform is a $69 Roku and a $199 Boxee Box that brings them more of the over-the-top content consumers appear to want.

Google has had a tough time convincing pay-TV providers that it's not a threat to their business, and apparently has had an even tougher sell convincing them it adds anything at all to their bottom line.

Nonetheless, Schmidt is toeing the company line, saying that there are ongoing talks and that the talks are getting more productive.

Schmidt said Google is sharing data with broadcasters, hoping to prove to them that Google TV is more of a friend than a foe (heard that anywhere before?), and that it would behoove them to join forces, saying the platform really is an opportunity for Hollywood to enter a new digital age. Broadcasters, though, just can't see it; they can't see a business model that works, they can't see how it monetizes.

Schmidt has repeatedly painted Google TV as a chance for content owners to get more eyeballs on content, to create a new revenue stream, using the logic that a new stream is needed to keep the lifeblood of the industry flowing--call it a coronary bypass for Hollywood, a patient that has lived large for years but now is looking at a change in its lifestyle--one it really doesn't want to embrace.

Disney CEO Bob Iger, during the company's earnings call last week continued his bearish assessment of physical media sales, sounding a bit like Eyore as he talked about the steady decline in DVD sales. He said he doesn't believe their erosion is due to cyclical trends in the economy, but to "competition for people's time." And he doesn't believe that's going to change, even bringing Disney's newest "gonna be gold" title into the discussion:

"If ever there's a title that would do well it would be Toy Story 3, particularly in the sell-through side because it's a title that just makes a lot of sense for people who are going to let their kids watch it multiple times to own versus rent, for instance," he said. "It will do quite well. I am not going to make predictions as to what it will do, but if you were to look at the numbers for Toy Story 3, which will be extremely strong, versus what films we did just three, four, five years ago, you'd be sobered by those numbers."

More like gasping for breath and holding your chest.

DVD sales numbers are in freefall... how long before they're D.O.A.? What's Hollywood pinning its hopes to next? Hollywood, obviously, isn't buying... yet.

But neither is Google panicking. While it looks very unlikely that Hollywood will be converted to Google TV anytime soon, that may not be much of an issue. Google is used to spending money as it experiments, just look at how patient it's been with YouTube, which is still being tweaked and reinvented and molded.

And, frankly, with virtually no investment in hardware (thank you Sony and Logitech), it doesn't have inventory to worry about. Google can be as patient as it needs to be. And, sometimes--this time--patience is rewarded.-Jim