Can Google Android TV Compete in the Connected Living Room Market?

The search giant is introducing Android TV as a set-top box and a built-in service.

Jun 29, 2014 at 9:12AM

Google's (NASDAQ:GOOG)(NASDAQ:GOOGL) newly announced Android TV represents an even stronger attempt to compete in the connected living room space. The set-top box and built-in service, which was announced at the online giant's seventh annual Google I/O developer conference, joins the company's Chromecast device in the very crowded field.

The battle to control the living room features an impressive list of major technology players. Microsoft (NASDAQ:MSFT)Sony (NYSE: SNE)Apple (NASDAQ:AAPL)Amazon (NASDAQ:AMZN), and Roku are all making a bid to control your family's television. With that control comes the ability to sell you apps, movies, TV content, games, and more. It essentially puts a store in your living room.

Unlike the Internet, where competes with every other online retailer, the connected living room is generally a closed system. If you pick a device -- say an Xbox One -- then all of your purchase options are routed through Microsoft's store. That's a pretty sweet deal for Microsoft, or whichever company's device you are using, as it takes a cut of every dollar you spend.

What is Android TV?
Chromecast, Google's first foray into building a connected living room device, is a low-end offering. The $35 stick-style device plugs into an HDMI port on your TV. Once connected, users must use a smartphone, tablet, or computer as a remote control to operate it. The Chromecast offers a selection of apps -- like Netflix (NASDAQ: NFLX) -- and it also allows users to "Cast" any video from a phone, tablet, or computer onto the bigger screen.

It's a neat system, but the lack of a remote makes it somewhat less useful than the set-top boxes sold by Apple, Amazon, and Roku. Casting is also a mixed experience that's highly dependent on your home's Internet speed. In a very limited experiment, I found that Chromecast worked flawlessly when using Netflix and other native apps, but my attempt to cast the WWE network from my computer led to a lousy picture with lots of stops and starts.

Android TV is a traditional set-top box in line with Apple TV, Amazon Fire TV, or a Roku box. There will also be an Android TV service that manufacturers can embed directly into a set, creating an Android-powered smart TV. The device and service will have the ability to cast, as well as a voice-command feature that appears similar to the one Amazon offers. The company showed off Android TV at its developers conference and has a web page touting it, but full details -- including a release date and a sale price -- have not been made public.

Here is how the company explained the product on a Google blog:

Now, in addition to Chromecast, Android TV brings all that you love about Android apps and games to your living room. Android is baked directly into your TV-watching experience, through a set-top box or as part of your TV. You can use voice search to find a live TV show, a good flick from Google Play, or a music video on YouTube. Plus, because it's Android, you'll be able to play your favorite Android games, reimagined for TV and with a gamepad. Android TV, which, like Chromecast, supports Google Cast technology, will ship with products from a range of consumer electronics companies later this year. 

Google did not say which companies it would be partnering with.

How big is the connected living room market?
The connected living room market is currently worth approximately $612 billion a year, according to a new report from Markets and Markets. The analysts behind the report forecast that the total connected living room market will grow to $957 billion by 2020. 

One of the reasons controlling the living room has become so important is that digital delivery is quickly replacing physical ownership in the media world. Digital rentals and sales have already caused the end of the video store. The same phenomenon has made record stores a thing of the past, and now it is happening again in video games. 

Will it work for Google?
Chromecast was quick to gain market share because it cost $35 when the going rate for a set-top box was around $99 -- what Apple TV and Fire TV cost. It seems unlikely that many people bought the streaming stick because it was an Android device.

Google does not have the integrated, interlocking universe that Amazon and Apple do. The search giant does have the Google Play app store, but its range of products and services lacks the cohesion of its competitors. Amazon and Apple offer the same experience, no matter what device you are using. Google does not have that, which makes it unlikely that customers will be looking for an Android set-top box just because it's an Android set-top box. Google could win customers with price or by offering as-yet-unannounced features that trump its rivals. But with what we already know, it seems unlikely that there will be huge demand for the physical Android TV.

The built-in service, however, seems like a better idea. There are currently smart TVs, but there is no standard for an embedded "smart" system. If Google can make the right deals and make sure adding Android TV does not inflate prices, it could pull a successful end-around. If you buy a TV and it already has popular apps, games, and other features built in, you probably wouldn't buy another set-top box just because you prefer the Amazon or Apple experience.  

All told, Google likely won't sell a lot of set-top boxes, but it could still emerge as the winner in the battle to control your living room.

Who will be the biggest winner in the battle 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. 


Daniel Kline is long Microsoft and Apple. He owns a Roku, a Chromecast, and a Fire TV, along with various game consoles. The Motley Fool recommends, Apple, Google (C shares), and Netflix. The Motley Fool owns shares of, Apple, Google (C shares), Microsoft, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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