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As LG launches next-generation Google TV sets, how well is Google positioned for the future of television?

The Internet giant has a longstanding strategy to extend its domain from PCs to other devices, particularly mobiles and also TV sets. For television, this would bring both its search service and YouTube’s content to smart TVs and thereby grow new revenue streams from the main screen in consumers’ homes.

Television sets powered by the Google Android operating system give the company a new distribution channel, in addition to mobile, for premium content from its Google Play apps and entertainment store (formerly Android Market).

Two other elements to the strategy are developing professional-quality content for YouTube and attracting more users to the Google+ social network, which is being enhanced with a video chat and broadcasting feature, Google Hangouts.

 

Next-generation Google TVs are now in stores

LG is the first Google manufacturer partner to launch second-generation Google TV sets, with the debut this week in US stores and on Amazon of two models: a 47-inch set ($1,700) and a 55-inch set ($2,300). However, LG will still continue to market Internet-ready sets based on its own NetCast smart TV platform.

The LG sets are effectively a relaunch of the Google TV platform that flopped with consumers and tech critics alike at its 2010 debut.

The TVs incorporate improved software, with a redesigned user interface, better search capabilities and more content. LG claims that they will be faster than the first generation, because they incorporate dual-core processors, and easier to use via the Magic Remote, which can be controlled with voice and gesture commands.

Next-generation Google set-top boxes and Blu-ray players are due out later this year from Samsung, Sony and Vizio.

 

Investing in original content for YouTube

Google has meanwhile been developing a content strategy via YouTube that aims to roll out 100 professional-quality channels and reposition YouTube as the leading Web site for TV-quality entertainment aimed at niche audiences.

In October 2011, YouTube announced its channel programme to partner with professional entertainment producers and fund their exclusive content for the new channels.

The $100m investment fund makes loans to the producers. YouTube recoups the loans from the ad sales revenue, which it also shares with the producers. The partners include major talent such as Ashton Kutcher, Jay-Z and Madonna.

December saw YouTube introduce a simpler navigation guide that emphasises professional content over the user-generated video that has previously been its mainstay.

By early May this year, YouTube was wooing advertisers to sign up for the channels, promising that it will spend $200m in marketing the channels to would-be viewers.

Google itself has taken a significant step further by investing directly in a leading producer, Machinima. This is the first time that Google has taken a stake in a content company and Google took the lead in the $35m funding round, with an undisclosed share.

Machinima makes a range of programming for 18 – 34 year-old male video game fans, including gaming news and reviews, gameplay tips and original Web series. An original live-action series based on Microsoft’s Halo games franchise, Halo 4: Forward Unto Dawn, will premiere on Machinima later this year.

Its videos attract more than 1bn views per month on YouTube, making it YouTube’s leading channel after music video services such as Vevo. The company claims its audience engagement is greater than music video, at 69 minutes of viewing per viewer per month.

However, Google executive chairman Eric Schmidt has also emphasised that YouTube does not intend to replace conventional television. Rather, it will be another means of distribution for it: YouTube is considering adding subscription services for premium content.

 

Google+ Hangouts on Air makes everyone a global broadcaster

A third aspect to Google’s TV and video strategy is the development of the social network Google+.

Google faces competition from Facebook and Twitter, as people choose to spend an increasing proportion of their time online in social networks. These compete for ad revenue, social network users making recommendations can pre-empt searching and so cut into Google search-based ad revenue, and it has been rumoured that Facebook wants exclusive access to the Vevo music video service, which is currently a top YouTube channel.

Google is therefore heavily backing its own Google+ service and claims that it has attracted 150m users.

The social network includes a group video chat feature, Hangouts, that enables up to 10 users to talk to each other via Web cams.

Future versions of Google TV will integrate both Google+, for viewers to recommend content to friends, and also Hangouts, for TV-based chats and broadcasting.

Google has been further developing Hangouts into Hangouts on Air, a global live broadcasting service similar to Justin.tv or Ustream. This enables an individual broadcaster to reach an unlimited number of viewers via Google+, YouTube or their own Web site.

In its beta test, it has been used for bands to Webcast gigs, educational purposes and political meetings, including a live session by President Obama in January. With its wider roll-out, professional TV broadcasters are beginning to run their own hangouts, including CBS for This Morning and talk show host Conan O’Brien.

Separately from Hangouts, an indication of the potential for Google+ to combine with YouTube is the UEFA Champions League final, which UEFA allowed to be streamed live via Google+ and YouTube, as well as on the UEFA.com site.

The match attracted over 300,000 viewers. Google+ users created more than 103,000 new circles on the UEFA.com Google+ channel, which hosted six hangouts during the UEFA Champions Festival.

 

Google and the future of TV

A great deal hinges on the success of the new Google TV sets and devices as they become available this year from all the manufacturer partners.

Strong sales will give Google new search advertising inventory on TVs, a wider reach for YouTube videos, their ads and branded content, and the potential to grow entertainment revenue from viewers accessing Google Play through their Google TVs.

A Google TV platform that is popular with consumers would leave Google well-positioned for the metamorphosis of the flat screen TV set: from a broadcast video receiver into an interactive multimedia device and a two-way communications system for a world where everyone is a producer.

 

Competitors

Google faces fierce competition for TV set dominance from a variety of major rivals.

 

Can Apple take a bite out of Google’s strategy?

While Google has leading TV manufacturers onside, some of the main threats emanate from Apple. These include:

  • Connected TV sets turning out to be essentially dumb screens controlled by smartphones and tablets (ie Apple iPhones and iPads).
  • Consumers viewing increasing amounts of video on tablets – and Apple iPads continuing to dominate the tablet market.
  • Apple actually launching the much-rumoured Apple TV set.

Even if the Apple TV set fails to materialise, Apple’s strengths in smartphones and tablets still gives it considerable influence over the TV set ecosystem.

It is significant that Google now aims to use its purchase of Motorola Mobility to develop more competitive Android-based smartphones and tablets.

 

Has Microsoft already established a dominant position with Xbox Live?

While Google and its manufacturer partners aim to engage consumers with Google TVs and devices, a major rival already represents entrenched competition for Internet-connected TV.

The Xbox Live subscription service for Microsoft’s Xbox 360 game console has almost 40m active members globally. Subscribers can access premium video from providers including Hulu, Netflix and ESPN. Google and its partners will have to sell tens of millions of Google TVs and devices even to catch up.

 

Will Google TVs compete with Android TVs?

Another threat to Google TV is ironically emerging via Google’s own Android operating system.

Chinese PC maker Lenovo is launching its ideaTV K91 TV set, which integrates Google’s Android 4.0. The second-generation Google TV platform runs on the older Android 3.1. Lenovo’s approach includes linking the TV set with an Android mobile device.

Lenovo itself has global sales ambitions and other manufacturers might be tempted to follow its lead in preferring other versions of Android to the Google TV platform.

 

Fierce competition in Social TV

The Google executive in charge of Google TV, VP product management Mario Queiroz, has admitted that search was not very popular in the first-generation Google TVs and that users expect to find content by browsing and from recommendations instead of having to think about something to search for.

If viewers prefer to discover TV and online video via social recommendations, will this put Facebook or Twitter in the driving seat? Or can Google persuade viewers to share recommendations via Google+ and chat about TV on Hangouts?

 

Skype and other video chat vs Hangouts

Even Hangouts itself faces competition. Some TV manufacturers already sell sets that provide video chat, integrating the popular Skype Internet phone service. US cable operator Comcast has also announced that it too will launch video chat services, aiming to let its subscribers talk with family and friends about the TV shows they are all watching.

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