Why Google TV Is Here To Stay

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It seems that if a new product or technology platform doesn't generate huge sales right away, you can count on it to be written off as a bust faster than you can say "LaserDisc." Google TV is the latest victim of this mind-set, with skeptics sounding the funeral march for the Android-based home entertainment platform following less-than-enthusiastic reviews for some early Google TV products such as Logitech's (Nasdaq: LOGI  ) Revue set-top box, and Sony's (NYSE: SNE  ) decision to slash prices on a slew of Google TV-enabled television sets and Blu-ray players. But writing off the platform this early in the game means overlooking both Google's (Nasdaq: GOOG  ) history when it comes to software development, and the strategic motivations of the TV manufacturers lining up to support Google TV.

Google's software strategy
As some longtime Google followers will tell you, Big G's attitude toward releasing new platforms is very different from that of, say, Apple (Nasdaq: AAPL  ) . Whereas Apple prefers to take a perfectionist approach to new products, Google has no qualms releasing something that's still rough around the edges for the sake of quickly building up a user base, getting partners on board, and generating user feedback. This was the case with Gmail, Google News, and most relevantly, Android.

If you were forced to predict Android's future success relative to the iPhone based on the reception for the first mass-market Android phone (HTC's G1, released in October 2008 by T-Mobile), chances are that you wouldn't be too optimistic. Its sales weren't terrible, but they couldn't hold a candle to the iPhone's, and any side-by-side comparison of the two products couldn't help mentioning how the G1 was missing some key features that iPhone users took for granted, and how its software was chock-full of bugs and quirks. But Google learned from its mistakes, lined up a slew of new hardware and carrier partners, and tweaked and retweaked Android to make it both more feature-rich and user-friendly.

Needless to say, Android's current standing in the smartphone universe is a lot different today than it was two years ago. And as my colleague Anders Bylund pointed out last week, Google appears set on putting Google TV on a similar development path, with upcoming Android updates clearly having large-screen devices in mind.

Why TV manufacturers are on board
But Google's engineering geeks and ad salesmen aren't the only people motivated to see Google TV succeed. Big-name TV manufacturers have a strong incentive to support Google TV for the sake of avoiding the dreaded c-word: commoditization. The success of low-cost manufacturers such as Vizio is already putting a squeeze on the margins of the TV industry's traditional big names, proving that consumers are willing to put brand loyalty aside if it means saving big money on their next set. And when it comes to using a living-room device for accessing the web and watching online video from the likes of YouTube and Netflix (Nasdaq: NFLX  ) , consumers are turning far more to video game consoles from Microsoft (Nasdaq: MSFT  ) , Sony, and Nintendo than to "web-enabled" TV sets.

That's why leading manufacturers have a big incentive to support Google TV. If they don't want their industry to slowly devolve into a commodity business, in which mainstream consumers base their buying decisions overwhelmingly on price, then they need to find ways to differentiate their pricier models through software and hardware alike.

Even with its early kinks and bugs, Google TV gives manufacturers their best shot at pulling this off.

Google and Microsoft are Motley Fool Inside Value recommendations. Google is a Motley Fool Rule Breakers selection. Apple and Netflix are Motley Fool Stock Advisor picks. Logitech International SA is a Motley Fool Hidden Gems choice. Motley Fool Options has recommended a write covered strangle position on Logitech International SA. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Apple, Google, Logitech International SA, and Microsoft.

Fool contributor Eric Jhonsa has no position in any of the companies mentioned. 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.

Read/Post Comments (3) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 30, 2010, at 6:46 PM, PSU69 wrote:

    GOOG gets it. Disclosure, long GOOG. Being able to select what you want to watch and when is the key to the vault.

  • Report this Comment On December 01, 2010, at 4:19 PM, MonicaPell wrote:

    With Fox, CBS, NBC, ABC, Comedy Central, Nickelodeon and MTV have all blocked their programming from Google TVwhat's left to watch, Wayne's World???

    Why would anyone want to pay $300 for a "TV" box that is blocked from so much programming? You can get more channels from services like . I've tried it. It's much easier to use and can show a lot of tv shows both live and on-demand.

  • Report this Comment On December 02, 2010, at 1:32 AM, rfaramir wrote:

    I would have thought that basing your TV on a free OS that all your competitors have equal access to would make the market MORE commoditized, not less.

    Not that that's a bad thing for us consumers, but except for lower tier producers, I don't see why they would like it.

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