Google TV: the Case Hasn’t Been Made to Consumers

I got my GTV last night in BestBuy. I was struck by several things immediately.

Despite the prominence of Google TV in in the store (see below) the case isn’t clearly being made for why I, the ordinary consumer, need one. Price and picture quality are going to be the biggest drivers of my TV purchase decision. The Sony Google TV is undistinguished in that area — in fact it costs a premium.

In addition there are several other “Internet TVs” on sale at BestBuy and the special features of GTV aren’t entirely apparent.

Here’s the likely consumer thought process: I already have the Internet on my PC (maybe my phone and iPad) so why do I need it on my TV? Well, the argument goes, you can watch online video, do video calling, get access to Android apps (eventually) and services like Netflix. But there’s nothing unique about any of that. Skype is on my PC and Netflix is now everywhere, including my iPod Touch. And if I’ve got an Xbox or Wii at home I’m getting Netflix and some of these other apps already.

My point is that it’s a bit murky to pay the premium that these devices command when the things they offer seem to already be available.

Then there’s the content problem. As we discovered last week, the networks are blocking GTV from showing their programming. Online, Google disintermediated traditional publishers by controlling the consumer experience and audience. The networks and others fear the same thing happening here so they’re mounting a united defense against Google doing it on TV.

The really strange thing is this: wouldn’t Google have negotiated with the networks and figured all this about ahead of time? I’m surprised that this dispute is playing out in public.

The SF Chronicle, which called GTV “troubled,” reports that control of the effort has been moved over to YouTube, which makes sense, and away from the Android folks who gave birth to it. The article describes the fears of the cable industry and content producers:

Content and cable companies – which depend on carriage fees, television advertising and monthly subscription charges – are wary of delivering less lucrative Internet content to the living room.

“Right now we don’t know the costs versus the benefits, because Google hasn’t done a good job, to tell you the truth, of explaining it,” said one network executive, who requested anonymity due to the sensitivity of the discussions. “We don’t know if there’s a viable business model.”

Cable companies in particular are worried about so-called cord cutters, who are canceling or scaling back monthly subscriptions as more content becomes available online.

Indeed “cord cutting” is the central consumer value proposition here. If Google and its hardware partners (Direct TV is also a partner) were able to say: “Kill your cable box and watch what you want for free,” this puppy would have a much stronger message for consumers. But of course Google can’t say that — in public at least.

Google TV, Apple TV and the other initiatives to marry TV and the Internet or deliver programming via IP are very threatening over the long term to cable and the profits of content producers. Having seen the example of newspapers and the music industry they understand clearly what’s at stake for them; that’s why they’re blocking until they can get revenue guarantees of some sort or at least see a viable business model.

By the same token this is a precarious time for GTV even though it barely has launched. Stalled momentum (or the hint of failure or confusion) could cause partners to lose confidence and pull back.

Apple TV failed to catch the public’s imagination and remained a tiny product for Apple until GTV forced Cupertino to reconsider and put more effort in. Now Apple TV costs $99 and offers movie and TV show rentals. Still it remains unclear how excited people are about Apple TV. Yet given the Apple experience, it’s likely there will be more bites at the apple (so to speak) for Google TV if version 1.0 doesn’t fly off the shelves.

The TV I bought last night (the smallest of the Sony TVs at 24″) cost more than $600 with tax. Most people will want larger TVs, which are more expensive (the Logitech box is the cheapest option at $300). However, I could get a comparably sized HDTV with equivalent picture quality for $200 less that what I paid. So I suspect we’ll see some cost cutting from Google and partners if consumers fail to “get” what the fuss is all about.