“The ability to learn faster than your competitors may be only sustainable competitive advantage.”
—Arie de Geus
For years, various companies have been trying to provide a more compelling viewer experience than what’s available with cable and satellite DVRs wich are unimaginative and lock viewers in. Companies like TiVo, Roku, and Apple have provided their own take, even Apple hasn’t yet found the magic sauce, and its Apple TV has been a hobby. Now, Apple has a new Apple TV and Google is also jumping in with Google TV, How will these two fare against each other?
Competing against the cable and satellite TV giants has proved difficult in the past for several reasons. These companies have the revenue stream to provide low cost or free (read: subsidized) DVRs and, historically, have had strong agreements with content providers. For example, the NFL Sunday Ticket is a DIRECTV exclusive and has been for at least ten years.
Nowadays, however, the TV and Hollywood studios have been more aggressive with permitting new outlets for content. You can chose Amazon TV, Netflix and Apple TV (as well as Hulu+) to watch TV and movies, although with some limitations. These include “limited commercial interruptions” on Hulu, a time delay from the prime time broadcast, even including Major League Baseball (MLB), missing TV shows reserved for broadcast only, or the lack of some live sports altogether. Getting what you want, when you want it, and minimizing your overall entertainment bill requires knowledge, technical expertise and patience. Even so, the critical point has emerged so that some (not most) viewers can think about canceling their conventional cable or satellite subscription.
Given this situation, the blockbuster question is: can one company, say, Google or Apple come along and provide a special, magical combination of:
…that, as a whole, can lure significant customers away from traditional cable and satellite TV subscriptions? I’ve made what I call the Seven Elements an HTML list to emphasize how many different and demanding elements that are required for success. For a company to focus on just a few items in that list is a ticket to instant failure.
That’s the magic question, and the answer to that is so elusive that even the mighty Apple has been held at bay, resigning itself to label the Apple TV a hobby. Now, Google thinks it has the answers and can, with high hopes, sweep the competition away.
Back in May, Google announced Google TV, which is software, and provided both an introductory video and a blog entry. This software will run on the Logitech Revue. Here’s what the video and blog describe, along with some clarifications I received in a chat with Google’s PR representative.
- Google TV built-in to a new Sony TV and Sony Blu-ray player. Or add the Logitech Revue box, loaded with Google TV, as a companion to the TV system.
- Search the Internet for TV shows.
- Access recorded shows on Comcast and DISH DVRs.
- A built-in Chrome Web Browser — which requires a wireless keyboard of a kind not yet disclosed.
- Access to social media sites like Twitter while watching TV
- Ability to access photos, music, games and 50,000+ Android apps.
- Build a custom home screen with favorite channels and Websites.
- Android OS.
Right away, one can see how Google TV meets the needs of seriously geeky home and business users. And right away, one can see several possible mistakes:
- Ordinary home users aren’t likely to sit with a keyboard on their laps. WebTV (later MSN TV) already proved that. And Apple wouldn’t have, wisely, designed such a simple remote for the Apple TV. However, we don’t yet know yet what the final form of that keyboard will be. It could be something a lot smaller and more convenient than even an Apple wireless keyboard.
- The Logitech Revue box is designed to be inserted between the Comcast or DISH DVR and the HDTV. That is, HDMI out of the DVR into the Google (Revue) box, then HDMI out of that into the HDTV. Then connect to broadband via Ethernet cable or wirelessly. That sounds easy enough for technical people, but getting it all set up, mating the keyboard, and so on will take some time. Will customers take to all that fuss? (DIRECTV customers can still access the Internet via broadband; they just don’t have access to their DVR.)
- How will customers feel about watching TV inside the computer-centric and security-challenged environment of a Web browser? The number of Apple customers who do that right now with a Mac mini is, well, minuscule. [UPDATE: Google points out that the Chrome browser can be placed in full screen mode for Internet content and that pass through content from the DVR is viewed normally.]
- Generally, only a few geeky types time share while watching TV, and when they do, it’s with a device like a smartphone or an iPad in their laps. To think that users would enjoy watching NCIS (or even Gossip Girls) on one browser tab and jump over to Twitter to chat about it is bizzare and out of sync with mainstream TV audiences.
- It looks like the Logitech Revue will sell for $299. That’s well above the magic $99 price where customers can feel free to experiment.
Google pointed out that SDK for mobile Android apps on smartphones won’t work with this system. Next year, Google plans to offer the development SDK for Google TV.
All this brings us to search. An Apple enthusiast might suspect that, because Apple constrains the content on Apple TV, that Google’s search function will blow Apple out of the water. But there are compensating issues. First, when faced with too much choice, many customers become irritated, unfocused and cynical. Only a few TV shows, movies and aggregators (like Netflix) are the best of breed. Confronting a customer with all the dreck (and porn) on the Internet is not a winning strategy used by any of the competition. Second, there are existing TV products that already do this search. One is TiVo.
What’s Already Been Done
I spoke with Joe Miller, Senior VP of Marketing and Sales with TiVo in San Jose. He has 11 years of experience at TiVo, and before that he was with Cox Cable and DIRECTV. He’s a student of the industry. In our interview, he pointed out that the current TiVo boxes already allow search, in this order 1) Broadcast HD linear, 2) Syndication 3) Amazon TV (if the user has a login) and 4) YouTube. He also pointed out that if there were significant new technologies and ideas to be implemented in TiVo, including search, it would have already been done.
You might perceive that statement as a bit self-serving, but it makes the point clear: The perception that Google can bring something fundamental to the game that other smart companies haven’t thought about or that customers have been craving borders on naive. And the things that Google does seem prepared to do, which looks exciting to very technical customers, are also seemingly naive when it comes to an audience measured in tens of millions of average Joes and Janes.
I should point out that that a modern HD TiVo not only provides access to an off-air antenna, but broadband access to Amazon TV, Netflix, Blockbuster, RSS feeds, YouTube and Pandora. So if search and content alone were the magic sauce, TiVo HD systems would be flying of the shelves. I’m not trying to promote TiVo here; rather I’m making the point that technology alone is not the answer. The Seven Elements at the top of this article, as a whole, must become more than the sum of their parts to create a Big Win.
There’s more. Mr. Miller has years of experience listening to customers at TiVo. What they want, he told me, is 1) Access to Live TV (that is, sports), 2) access to an online, complimentary video library, 3) a seamless UI and 4) reasonable prices. One might well compare that to the features of Google TV to decide if Google is on the mark.
Another fairly popular system is the Roku box. I spoke with Brian Jaquet at Roku who pointed out that their system contrasts sharply with the original Apple TV. The Roku box is open, and there’s an SDK for developers. They’ve had Netflix for some time, and customers can access MLB.tv, Pandora, Amazon Video on Demand and others. The customer’s purchases are stored on Roku’s servers, so there’s no local storage — something that Apple is just now warming up to. Their focus has also been on ease of use, getting the box up and running at home in minutes. And there’s a link to the iPhone and iPad that I’ll explore when I receive a review unit.
However, Mr. Jaquet admitted that they’ve only sold about a half million Roku units since 2008 to date and expect to have sold a total of a million by the end of 2010. Contrast that to Apple which by most estimates has sold several million units since 2007. There’s more to success than simply openness and content offerings, and Apple knows that. (Although, given the current state of market affairs, Netflix is just about mandatory, and Apple finally admitted that with its new Apple TV.)
Mr. Jaquet had other fascinating insights. I asked him about content agreements and whether they have gone well or poorly compared to Apple. He pointed out that a lot of content today is supplied by aggregators, such as Netflix and Amazon. Those organizations work out the agreements and then license access to companies like TiVo, Roku and Apple.
Next, these aggregators, mindful of the broadband capabilities of average Americans, universally supply content in 720p. The reason is that 720p HD video, when moderately compressed, can be transmitted with modest bandwidth, 2.4 to 4 Mbps. To try that with 1080p would result in bandwidth requirements that most U.S. households just couldn’t meet. As a result, it’s just uninformed nonsense when self-appointed technical experts slam Apple for limiting the new Apple TV to 720p. The fact is, compressed 720p is all most Americans can absorb with their current broadband. Never mind whether some think they can see the difference between 720p and 1080p; most can’t.
Finally, with regard to Google, Mr. Jaquet said, “I think Google’s being a bit naive right now. But they’re a persistent company, and they may take ten years to get it right. As for us, we feel good about the content we provide now and what we expect in the future.”
In Part II, tomorrow, I’ll look at the Apple side of the equation.