Google TV and the OTT space: Winners and Losers? It's still a wide-open game

Depending upon whom you talk to, Google TV will either be the missing link that brings over-the-top delivery into the mainstream, or just another footnote in the history of online video's ongoing march to the living room.

Whatever the outcome, its rollout last week at Google's developer conference has stirred the OTT pot, which already has been bubbling of late with new announcements from gaming consoles like PS3, which this week struck a deal with HBO to bring 11 of the programmer's shows to its users on demand, Roku's launch of a new interface for Netflix subscribers, and Kylo's new Web to TV browser that allows users--for now--to have access to Hulu on their TVs.

Google's aggressive entry into the OTT market isn't surprising. It's been patiently probing and experimenting with online video for years through its YouTube property that it bought for $1.65 billion in 2006, recently introduced an expanded VOD movie offering and has an awesome OS in Android with which to work.

And, of course, it has an advertising network that it's dying to get to a broader audience outside of the Internet and an appetite for a slice of the $70 billion television linear ad market.

Google has lined up a powerful and experienced group of partners to help it get rolling, Logitech, Intel, Sony and Dish Network bring experience, plenty of cash and even some extra entrepreneurial spirit to the endeavor.

What's the market say? Well, from a consumer standpoint:

  • A Strategy Analytics report says that fewer than 22 percent of U.S. households feel they're getting good value from their pay TV services.
  • SA also says that cord-cutting is accelerating, with as many as 10 percent of U.S. households looking to get out from under their pay TV bill. And that's a pretty conservative estimate.

The other side of the coin suggests that any OTT offering, even one like Google TV, which offers a more "true" convergence of the Web and television without dumbing down the Internet experience, will more likely be seen as an add-on by many consumers.

OTT is gaining momentum, even without reports and studies, it's easy to see that more companies are going "all in," but who manages to catch the wave and who's left treading water still is to be determined.

Not everyone is running scared: An STB company looks for an edge

At first glance, one of the initial casualties of a successful Google TV launch might seem to be set-top boxes that are just getting started in the market. Companies like Roku, Boxee-which hasn't yet brought its STB to market but has a great software interface up and running-and a bevy of smaller wanna-be players who've been in a "ready-to-launch" mode since Google TV rumors began earlier this year, just don't have the backing and name recognition the search giant brings to the consumer table.

But they have quality products and, I the case of Boxee and Roku, a good start on a consumer base.

Andrew Kippen, VP of Marketing for Boxee, when the Google rumors first began said, essentially, that OTT is a big market that's just begun to be realized, saying there was plenty of room for many players.

This week, he said Boxee's looking forward to seeing Google TV land.

"We obviously followed the announcement and the demo," he said. "We think that it would be great to see an open OS such as Android gain market share in the living room."

Kippen said Boxee would be building an Android-based App, that would allow users to download Boxee on their TV and start using it without

the hassle of connecting their computer to the TV.

Boxee, he said, has a different view of browsing the web on TV.

"We believe browsing the web "as-is" makes more sense on laptops and mobile devices than it does on TV," he said, adding that "anyone educating consumers about the great content available on the web and encouraging them to get it on their TVs is helping all of us.

"There's so much growth potential in this market, and so much to be improved upon, that we don't expect there to be a clear "winner" for a while."

Google TV is an OTT enhancement: An analyst sees a balance

Greg Fawson, president and principal analyst at X Media Research, says he senses a conciliatory tone in Google's rollout so far, one that looks to enhance, rather than replace the current model of video consumption.

"In that sense, it doesn't appear to be a threat," he said. "However, the device can clearly be used without a pay-TV service. If it is much better than Roku, Boxee, VUDU, Popbox or any of the other OTT boxes and you can get a lot more content on it... it can potentially appeal to the cord cutters and perhaps accelerate that."

Rollout will be slow, he says, unless other operators besides Dish Network--which is the only one currently publicly involved-decide to get involved. Even then, if the cost-as a rental or purchase-is too high, it could face problems.

"Anytime customers have to shell out cash, it's going to have an impact. You think about TiVO. They have the highest customer satisfaction rating of any CE manufacturer and offer a more comprehensive service with better UI than you can get with any STB out there," Fawson said. "However, they just aren't flying off the shelves. The simple answer is that customers don't want to shell out cash for something they can rent from operators that does a reasonable job."

Fawson said a successful Google TV has a number of broad reaching implications across the ecosystem of OTT and online video.

"The Three Screen thing has been talked about forever. However, if you now have STBs, TVs and cell phones--as well as iPad competitor devices running Android--you all of the sudden can make widgets and apps cross-platform compatible and really enable some interesting usage models.

"I think one thing going for it is that Intel has been desperate for years to get into the living room. They tried with their whole VIIV initiative and others and have largely failed. They have even tried getting into the STB market and Cell Phone markets and have largely not been successful."

But, he said, with with Google TV STBs and Intel's Atom processor in TVs, the market is huge.

"If Intel is willing to put some serious dollars behind marketing this--which I think they will be--I think you have a huge combined force of Google, Sony and Intel that can create huge consumer awareness," he said.

Google TV may be the first true bridge between the TV and PC: An analyst sees cord cutting accelerating

Ben Piper, a Strategy Analytics analyst, says too many people are discounting what Google TV can do: make OTT delivery a reality for the average American.

"Despite talking points to the contrary, which suggest that Google TV is somehow ‘complementary' to the existing pay-TV environment, we are seeing momentum in the over-the-top space, and believe that OTT in general (and Google TV in particular) could pose a real threat," he said. "While it has been possible to emulate a pay TV environment with a game console, a TV and a PC, the level of sophistication required to knit these together into a seamless and enjoyable viewing experience went far beyond the aptitude or interest of the average consumer. Google TV may just bridge that gap."

While price will affect the speed of the rollout, Piper, says content availability will have a major impact.

"Consumers care less and less about how they are receiving their content--they're interested in what they are receiving," he said.

And, while he sees traditional network operators as being the most likely to be hurt by a Google TV success, saying they run the risk of being relegated to mere pipes, consumers are likely to be the big winners.

"The consumer wins here, through easier search capability and content discovery," he said. "The missing link up until now has been navigating and finding relevant content, and Google TV could deliver on this."

What sets Google TV apart, he said, is that, unlike its predecessors, it's essentially an open Internet product. 

"It fills a gaping hole that exists in the OTT environment, by providing what appears to be a seamless search and discovery functionality," he said. "The timing could be just right for this, as OTT becomes a reality."

In some ways Google TV doesn't go far enough: A competitor sees a lack of live programming as a shortcoming

Robert Saunders, president and co-founder of Skitter.TV, which helps Tier 2 and Tier 3 telcos bring IPTV to customers in small, generally rural markets, says that, while Google TV is an interesting addition to the market, it doesn't match what IPTV can do: bring live TV into the living room.

"We really don't see Google TV or any other pure OTT platform as a direct competitor to Skitter.TV," he said. "We believe true convergence requires live TV, over-the-top video, user-generated content and video-on-demand in one unified environment.  The traditional IPTV ecosystem is designed for live programming."

The issue with Google TV, he said, is that although it "appears" live TV will be supported, it's not clear when or how. And, he said, until it is, Google is at a disadvantage.

"Despite time-shifting and place-shifting trends, there is still strong demand for live programming, especially with sports and news content," he said. "Right now, the lion's share of OTT video consists of 'on-demand' replays of previously aired network programming and user-generated content. We've redesigned the traditional IPTV infrastructure to accomplish true convergence of all types of media and media delivery business models, including both OTT and linear TV content."

He does, however, welcome Google's input in advancing search technology in the market, and says their financial strength eventually will help with the "development and adoption of open OTT standards and platforms."

From a telco market standpoint, Google TV just doesn't address the needs of a service provider. 

"The Tier 2 and Tier 3 telco's we're working with are counting on TV services as a competitive strategy to combat cord-cutting, improving customer retention and increasing ARPU," he said. "There are a number of reasons to believe that Google's TV initiative could weaken those strategies."
And, he said, small telcos, are in a strategic conundrum, they have to rollout IPTV services as quickly as they can, they can't afford to wait.

The potential portability of Google TV, not just from screen to screen, but provider to provider, also doesn't fit well with service providers who are looking for ways to enhance customer loyalty.

Google TV, he says, is a customer play that turns telcos into pipes.

"That leaves many service providers with the same issues-growing network video traffic with no avenues to monetize that traffic and limited opportunities to retain customers," Saunders said. "(Skitter.TV has) taken out a lot of the cost from the technology platform while reducing the impact on network resources.  Will Google have any incentive to work with individual service providers to optimize and customize video delivery?"

Saunders sees Google TV as another source of content for platforms like Skitter.TV, and says the company is likely to take its API and integrate Google TV apps into its hybrid IPTV/OTT media player, and also will likely evaluate creating a Skitter.TV app to be added to the Google TV ecosystem. 

But, he said, in the end, service providers need an end-to-end solution that gives them options to maximize revenue, minimize customer attrition and compete more effectively with localized services while managing their network for efficiency and quality of service.

"On its own, it's not clear Google TV can address these needs," he said.