As Roku (NASDAQ:ROKU) runs away with the smart TV market, building nearly one of every three sets sold, Google is trying to make sure Amazon.com (NASDAQ:AMZN) doesn't gain any competitive advantage by blocking smart TV manufacturers from partnering with it if they're already using Android TV.
The agreements the Alphabet (NASDAQ:GOOG)(NASDAQ:GOOGL) division signed with set makers not only allows it to block access to the Google Play store and Google apps on the TVs, but extends its reach to smartphones and tablets as well.
Never the twain shall meet
According to Protocol, smart TV makers that use the Android OS for their sets are prohibited from using so-called forked versions of its operating system, which would also prevent Amazon's Fire TV OS from working. If the company violates the terms of the Android Compatibility Commitment, Google can prohibit it from using the Google Play app store or any Google apps. What is seen as the most pernicious aspect of the restrictive covenants is the part where it extends Google's right to terminate access to the app store and apps across all of a manufacturer's devices.
Companies like LG and Samsung, which make smart TVs, smartphones, and tablets, could see their access blocked across the board, which would make their devices less popular.
A surprising laggard
It could help explain why Amazon Fire TVs have had trouble gaining traction. The e-commerce giant's other streaming devices, like the Fire TV Stick, are nearly as ubiquitous as Roku's -- it barely trails Roku's market share, 39% to 30% -- but the same can't be said for Amazon's smart TVs.
Data from Strategy Analytics last summer showed smart TVs with the Roku operating system installed accounted for over 30% of all connected TVs sold in the U.S., but Amazon was a distant second, with just a 12% share. Google, with both its Android TV and Chromecast, trailed in fourth place with 9%.
Even as Roku announced at the Consumer Electronics Show earlier this year that it was greatly expanding the number of manufacturers for its Roku TV to 15 in North America and Europe -- to include ATVIO, Element, Hitachi, InFocus, JVC, Magnavox, onn, Philips, Polaroid, RCA, Sanyo, Sharp, and Westinghouse, to go with Hisense and TCL, which currently manufacture sets -- Google may want to prevent Amazon from pulling further away from it.
Google's policy of prohibiting smart TV manufacturers from building Amazon sets may also be a way for the Alphabet company to prevent set makers from building competing devices. A smart TV company that wanted to develop its own OS based on a forked version of Android will think twice about doing so if it is going to be shut out from the most popular app store and apps.
Missing the forest for the trees
Protocol says Amazon admits it probably competes most closely with Google in the TV market, and it quotes Google's Android TV head, Shalini Govil-Pai, as saying, "What keeps us awake at night is Amazon."
The companies have long had animosity toward each other, a heated competitive spirit that infamously spilled over in 2015 when Amazon stopped selling Chromecast devices on its e-commerce site and Google retaliated by blocking access to YouTube on Amazon Fire devices. The two, though, settled their dispute last year.
While there are anti-competitive concerns about the restrictive agreements Google has manufacturers sign, it may be missing the larger picture that while the two tech giants trip each other up, Roku continues to run away from the pack.