Only a few years ago nobody would have thought that companies like Intel, Apple, or Google would be scrambling and throwing their muscle around to be in your living room, and not in any place, but inside the “dumb box” that will be not “dumb” any more, your TV.
Intel and Logitech have their own agendas as well. Intel has been trying to market its new chips into consumer electronics, and developing an open platform hand by the hand of Google can be the opportunity to create the Wintel platform for home entertainment, the Googtel, I guess. Google no doubt will base its software on Android and pull all of its resources and the community of developers to create as soon as possible a myriad of apps to grow the first entertainment ecosystem. If they succeed, we will have an interesting situation with Intel holding the most precious private IP of this new development environment.
Logitech is presumably in the game to be able to enter the consumer electronics market for the millions of TVs that do not have the capability to be turned into these new “Smart TVs.” Creating a cheap, Intel-based Google-powered set top box seems a very good idea to offset the dwindling sales of mice, keyboards, and standalone cameras, devices more and more integrated into laptops and touch-driven computers.
The business model seems quite obvious. Since the inception of television companies have been trying to “help” you decide what to watch on your TV and in the process earn some profits by stuffing advertising with their programming. The first TV channels, predecessors of today’s free advertising-supported channels, were the content aggregators of the time. They would purchase content from third parties, produce some of their own, and construct a “programming grid” that would be broadcast to your home. This was done first via the airwaves, and then in some countries, via coaxial cable. The competitive positioning of these channels relied in two key assets: first and foremost the license to use a scarce resource (a government assigned frequency through which to send the signal to you), and second, being able to secure by contract content viewers would appreciate. This begun to change when the capacity of the cable networks increased and digital TV allowed to multiply the number of channels received by viewers. Using the parallelism of retail, we went from having a few stores in town to the grand opening of a great shopping mall. This clearly fragmented audiences, and advertising, the main source of revenue got fragmented as well, with the subsequent drop in income, pushing channels to reduce costs. These changes, even if profound, brought challenges that were overcome with relatively small adjustments of the business models: looking for blockbusters, securing first exhibition windows in TV, switching to pay per view, etc.
Now the situation has changed drastically entering completely different scenario. The number one competitive pillar, the use of a yet somewhat scarce resource has vanished. Via the Internet you can theoretically watch any content from anywhere in the world.
And if this is so, what does the world “channel” mean? Aggregators can be dynamic, tailored to your individual needs, making money by inserting the advertising that suits your needs; independently of it is a global brand or your neighborhood corner store.
And which company is the master of individually targeted advertising? It should be no surprise that when looking for avenues of growth, Google, the king of internet advertising and search, Intel, the ruler of the PC processor industry, Sony, the leader of top-of-the-scale consumer electronics, and Logitech, the number one keyboard manufacturer join forces to develop what they hope will be the winning platform of the near future.
You are absolutely right on that. Let me add that it is also a strategic move from Google that aims to widen its two sided market (yes, I learned that today from Prof. Kaganer). This will be achieved by increasing its user base with TV-watching eye-balls, and accordingly the advertisers will see this addition as fresh meat.
Remains to see how Google will deal with copyrighted content providers, as they already almost killed the print media (T. Turner is quite unhappy already).
Best regards.
I believe this time it has a better chance to work because the net (the cloud) is a lot richer in content that it was when Webtv and the likes tried to do it. Now there is a wealth of AV content both user generated and professional (like Zulu) that will allow a serach company to add some value, not to mention adding the possibility of twitting or faceboking with your frinds while watching a game!
Good analysis professor Valor. One small question though : What makes you believe it’s going to work this time ? I mean this convergence has failed before so many times that i could even remember : Webtv, NCI, Sony,…. All these earlier forms of internet TV did not survive for all the same reasons. Do you think the presence of Google in this consortium would give it enough stamina to survive this time ?