In Television, Google Gets a Mulligan

U.S stocks are rising on Wednesday morning, with the benchmark S&P 500 and the narrower Dow Jones Industrial Average (DJINDICES: ^DJI  ) up 0.17% and 0.23%, respectively, at 10:15 a.m. EDT. One likely cause: the greater than anticipated contraction in first-quarter GDP, from 1% to a 2.9% seasonally adjusted pullback in the final estimate from the Bureau of Economic Analysis -- the worst quarterly drop in several years. The final finding took the market by surprise -- it's significantly lower than the 1.8% drop consensus estimate and even outside the consensus range, which bottomed out at negative 2.4%. Cheer up, though, there are still some growth stories out there: Witness Google (NASDAQ: GOOG  ) (NASDAQ: GOOGL  ) , which is preparing to attack another segment with a new product launch today.

And then there were three. Google will join Apple (NASDAQ: AAPL  ) and (NASDAQ: AMZN  ) in offering a television set-top box in a further escalation of hostilities in the battle for control of consumers' living rooms. Google will present the new product at its I/O conference; the keynote address is scheduled to begin at noon EDT.

According to The Wall Street Journal, the set-top box will bear another company's brand, but -- crucially -- will run on the Android operating system. Users will be able to use their Android-powered smartphone to control the box, which will allow them to watch television and movies and play games. The same strategy of partnering with handset manufacturers, most notably Samsung, has propelled Android into pole position as the world's most popular smartphone operating system.

(Incidentally, during the conference, Google is also expected to present a smartwatch powered by Android Wear, a version of Android designed specifically for wearable devices.)

Still, Google's clout in the smartphone space will not automatically transfer to smart televisions. In fact, this is not the search giant's first swing at television: It has an existing offer in Google TV, which is available either as a box that connects to the cable (or satellite) receiver or is integrated in certain television models.

Google TV has not been a frank success, but it does not provide any gaming capabilities, so that is a genuine differentiator in the company's new offer. And, indeed, the Journal wrote that "the Android TV pitch is expected to include a focus on videogames, which are among the most popular apps on smartphones." Of course, in order to focus on video games, you need video games to focus on and, for that, you need developers -- which is surely one of the reasons Google chose to launch the new television box at a developers' conference.

Is there room for three participants in the smart television space? Perhaps, but if the development of the smartphone business is any indication, the bulk of the profits will be shared among no more than two players. Nonetheless, there is still everything to play for, as neither Apple nor Amazon have yet "cracked" television. As the battle heats up, however, we can be confident there will be at least one winner: the consumer.

Beyond Google, Apple and Amazon: You can get rich off the war for your living room
You know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


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Alex Dumortier

Alex Dumortier covers daily market activity from a contrarian, value-oriented perspective. He has been writing for the Motley Fool since 2006.

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