Google's rumored move into OTT delivery, the company is reportedly partnering with Intel and Sony to deliver an Android-based set-top box or television featuring its Chrome browser, stirred a lot of interest in the online video industry, and left a lot of unanswered questions.
Chief among them was just how serious was Google?
The Diffusion Group's Colin Dixon says he believes there's no doubt Google is making a play in the OTT marketplace, and that it's a game changer for online video and even Pay TV.
"It makes a lot of sense for Google to do this, to leverage the technology from Intel," he said. "And it puts a lot of pressure on other players, especially smaller companies who are navigating the field now."
What form its STB takes is less of an issue than it's been made out to be and. Although some reports place the Google TV price tag at $300 or more, citing its reliance on the Atom chip from Intel, Dixon says he thinks Google will rely on the C4100 Atom-based processor and be able to bring a vanilla version of its Google TV to market for $150 or less, competitive with other over-the-top STBs that already are fighting for share.
"It depends on what they include in the box," Dixon said. "If it's a DVR as well, well, it starts to get really expensive really quickly. But, if it's a pure STB like Roku, it could be slightly more expensive, but not much more... my expectation is in the $150 range."
Of course, Google could, as it has for its Android phones, subsidize the cost of a set-top box and fill it with bells and whistles, even a Blu-ray player, to make it more attractive to consumers. But, does Google actually want to build a box, or is it simply trying to spur the market on, to look to include Google TV in other boxes, like Blu-ray players or gaming consoles?
In the end, it's a moot point because the pressure is on the maret already.
"Obviously, it's got to be tough on a little company like Roku, or anyone else who's looking to be a player in that segment," said Dixon. "How do they respond?"
For Boxee, Roku and others, Google TV is dangerous
For a company like Boxee, which just came out with an STB to seed the market, it's a pretty rude awakening. Google obviously has much deeper pockets and better name recognition, and it plans to be an open platform, as opposed to Boxee's curated service, which could be a major selling point.
For its part, Boxee is maintaining that Google's entry into the market is a good thing for everyone.
"Studies show one-in-10 Americans are connecting their laptops to their TVs, which means nine-out-of-10 are not," Andrew Kippen VP of marketing for Boxee told me. "High-profile solutions like the Google-Sony-Logitech-Intel deal will hopefully raise awareness that the Internet is a viable premium entertainment platform among Americans and highlight the importance of open and free platforms on the TV.
"We hope the Google TV system will lead the way towards an open set-top box market, where applications such as Boxee can be downloaded and installed by users easily. We think this is a great opportunity."
Google TV needs to be more than a basic Chrome broweser
While Google is setting itself up as being the open platform for online video at the television, its more basic motivation is simply to establish its advertising footprint in the medium. How they get there will be interesting.
"If they just take Chrome and stick it onto their Google TV platform without doing much to it, it's not going to be a very enjoyable user experience and it's not going to go anywhere," said Dixon. "But they are very likely to optimize it for the TV experience, and that could be a major success for them."
Of course, for many of the recently launched, or soon-to-launch companies that hoped to play in the space, Google's entry could be devastating.
"The trick is discovering what piece, what wedge, is available to them," Dixon said. "Is there a way they can offer something Google doesn't; to produce a better browser than Chrome? If Google simply migrates Chrome over from the Internet--which I doubt they will--it won't be a very positive consumer experience, and that's an opening that can be exploited."
TV Everywhere could face its Waterloo
The other industry that really needs to be concerned about a Google entry in over-the-top delivery, obviously, is the cable industry and its nascent TV Everywhere product.
"What the hell do they do about Google?" asked Dixon. "With a player that big, with the resources it has, suddenly getting Hulu, CBS, other networks easily into a TV set from the Internet, it really begins to undermine what TV Everywhere is supposed to provide for their customers."
TVE, after all, really is simply a play by cable to maintain control of programming on the Web, to reinstate the breached pay wall the industry has relied on for decades. Keeping control of content is critical for cable and--right now--seen as good for content producers.
The problem is, it's a lousy value for consumers.
And that, said Dixon, is why an OTT play like Google TV holds such promise and is likely to force Pay TV to re-evaluate its business model.
Why cable is a poor value
It's an old argument, but it holds true: cable customers get hundreds of channels they don't want but still have to pay for. Consumers are looking for ways to avoid paying for them, if you find a way to provide an al a carte offering, the problem goes away.
"You've heard it before, but it bears repeating, the average consumer watches 17 or 18 channels with any regularity, but they have to pay 55 to 65 cents for the USA Network and 5 cents for the Outdoor Network whether they watch them or not," said Dixon. "If the web could deliver just the channels you wanted, instead of paying an average of $71 a month to cable, you'd probably be willing to go to ESPN's website and pay $4 a month, or to USA and paying it 55 cents. For extras? You'd go to iTunes of Netflix for video on demand.
"Something like Google TV will, in the end, succeed and force a change in the cable model because it's what consumers want to do, and the Internet will eventually support that better than traditional models."
What Google is doing with its Google TV play is putting pressure on business models that have enjoyed a special position in the U.S., a legislated monopoly for 40 some years. Consumers simply haven't had a choice. And even with the increase of telco and satellite TV offerings, the choice for consumers has been slim.
"If you look at what Google's doing in that context, the timing is very good," said Dixon. "The market is ready, consumers are smarter, and they have more power to force some kind of change."