Will Google Make the Same Mistake as Amazon.com?

Like Amazon.com's Fire TV, Google's Android TV is capable of playing games. But it will need a consistent controller to challenge Microsoft and Sony.

Jul 7, 2014 at 9:35AM

Google's (NASDAQ:GOOG)(NASDAQ:GOOGL) Android TV will power a number of set-top boxes and smart TVs that will be available for purchase later this year. These devices will compete with Amazon.com's (NASDAQ:AMZN) Fire TV, offering access to streaming video services.

Like Amazon's box, Google's Android TV can also play video games, opening up the possibility that Android TV-powered devices could, one day in the future, replace traditional video game consoles like Microsoft's (NASDAQ:MSFT) Xbox One and Sony's (NYSE:SNE) PlayStation 4. Unfortunately, Google has yet to clarify its position on controllers: Will all Android TV implementations ship with a standard controller? If they don't, it could severely hobble the platform, at least in terms of gaming.

Microsoft wavers with Kinect
In the video game industry, bundling hardware has historically been necessary to facilitate adoption. Console makers have, over the last 20 years, released various hardware add-ons intended to expand upon the capabilities of the underlying console.

None of them have been particularly successful. Although all owners of a given console will, by virtue of having purchased that console, own all the original hardware, add-ons are typically only adopted by a small subset of original buyers. Software developers, in turn, shy away from supporting that hardware, as there is no guarantee that their customers will have it.

The PlayStation Move, a camera and controller solution intended to enhance Sony's PlayStation 3 with motion controls, is a recent example. Predictably, few PlayStation 3 owners actually purchased the Move, and few developers made games for it. Although Sony's management didn't explicitly call it a failure, it admitted that it "could have done a better job."

Microsoft's Kinect for the Xbox 360 was far more successful, but even then, fewer than one-in-three Xbox 360 owners had purchased a Kinect as of February 2013.

To rectify this problem, Microsoft decided that the second version of Kinect would come bundled with the Xbox One by default. Despite widespread backlash in the gaming community, Microsoft insisted that the Kinect 2.0 was integral to its vision for the Xbox One, and that removing the Kinect would be impossible.

After falling sharply behind Sony in sales, however, Microsoft relented, and began selling $399 Xbox Ones that didn't include Kinect. Microsoft insists that it isn't giving up on Kinect, but its prior stubbornness highlights the importance of hardware bundling.

Amazon's mistake
Having only launched in April, it may be too early to declare Amazon's Fire TV a failure. The e-commerce giant bragged that it had sold out of the device in April, citing unexpected demand, but as usual, Amazon offered nothing in the way of sales figures, making it difficult for investors to gauge its popularity.

In time, Amazon's Fire TV may capture a sizable portion of the set-top box market. But as a video game console, I doubt the Fire TV will see much success. Amazon has released a controller for the device, but sells it separately. At about 40% of the Fire TV's base cost, it seems certain that most Fire TV owners won't bother with the controller. That, in turn, makes it unlikely that many game creators will have interest in the Fire TV. It's not a perfect measure, but there is some evidence to suggest that the Fire TV's controller is less popular than the set-top box: While the Fire TV itself has over 6,000 reviews on Amazon's website, the Fire TV controller has just over 300.

Google puts Green Throttle to work
Google acquired video game controller company Green Throttle Games earlier this year, leading to speculation that Android TV would come with a standard, custom-controller solution. Images of that controller may have leaked on the Internet (via Tom's Guide). Although it appears legitimate, baring uncanny resemblance to Green Throttle's prior controller and coming with Android-like buttons, it remains unconfirmed.

More important is Google's policy for that controller -- will that be the standard controller for Android TV? Will all manufacturers that use Android be forced to include one with their devices? Given Google's commitment to openness with the Android platform, that doesn't seem likely.

Google teased the gaming capabilities of Android TV heavily at its I/O conference in June, showcasing a high-resolution video game demo running on the Android operating system -- suggesting that it's taking high-end gaming seriously.

In terms of casual smartphone games, Android is already huge, but in order for it to expand into the living room, and challenge the established console incumbents of Microsoft and Sony, it will need consistent hardware.

Leaked: Apple's next smart device (warning, it may shock you)
Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out, and some early viewers are claiming its everyday impact could trump the iPod, iPhone, and the iPad. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google (A shares), and Google (C shares). The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Microsoft. 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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