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4 Ways Alphabet Is Expanding Its Television Offerings

By James Brumley – Jun 10, 2020 at 6:02AM

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Streaming cable television looks more prioritized than it's ever been for the company.

Alphabet (GOOG -1.39%) (GOOGL -1.40%) may be the king of search engines, but its presence in the television market has been nearly nonexistent. Sure, its YouTube is the go-to platform for sharing and watching crowd-contributed digital video, and YouTube TV adds actual studio-made programming to the mix. YouTube TV presently hosts a modest 2 million paying subscribers, which translates into a modest $3 billion in annual revenue. That's hardly a show stopper.

Don't be surprised if Alphabet's digital television footprint expands much more rapidly over the course of the next five years than it has during the past five, however. The company has made four important moves on the TV front just within the past month that could finally, collectively, turn it into a television powerhouse.

Woman's hand holding a television remote, selecting a streaming option.

Image source: Getty Images.

1. New Chromecast dongle may come with a remote

Alphabet's Google officially jumped into the scripted program and movie market (outside of YouTube) in 2013 when it debuted its first Chromecast. The device streamed Netflix (NFLX -4.49%) content, YouTube videos, Google Play media, and a couple of music services. It didn't come with a remote control, however, as Google assumed at the time you'd prefer operating the device with your smartphone, tablet, or even your computer.

It's difficult to say for sure that's why similar devices from Roku (ROKU -1.66%) and Amazon (AMZN -3.01%) have left Alphabet in the dust in terms of market share, according to numbers from Parks Associates. But the lack of an included remote has been a not-infrequent complaint about the device.

That may cease being the case going forward. While they're only rumors, the rumors that the next Chromecast device will be packaged with a dedicated remote are relatively credible ones.

2. Android TV rumored as Chromecast's new OS

It's complicated.

To-date, Chromecast devices have been powered by an operating system that looks a bit like Google's Chrome OS. Perhaps more relevant, the installed OS was not Google's popular (and familiar) Android. It's odd, in that there is an Android TV app that works with smart televisions from manufacturers like Sony and now in the United States, TCL.

Now it looks as if Google is finally going to meld its two related but distinct technologies. While just another rumor, whispers that the upcoming Chromecast will be powered by Android TV again look and sound reasonable.

They're certainly intuitive. Such a feature would improve the reach of the Google Play store, including consumers' access to third-party video content that generates sales commissions for Alphabet.

3. Android TV's new interface points to YouTube TV

It's yet another rumor, but again, it's a reasonably credible one: The new Android TV interface appears to feature YouTube TV on the homescreen, offering a "live" option that would steer viewers to linear-like cable broadcasts from cable TV channels.

Given the prospective addition of a remote control to new Chromecasts, as well as the likely use of Android TV as the new Chromecast's operating system, turning its streaming receivers into cable-capable devices just makes good sense. With that change, the new Chromecast is just as capable and flexible as Roku devices and Amazon's Fire TV hardware, which can already plug watchers into live television content.

4. YouTube Select addresses TV-based viewing

YouTube may be the web's digital video champ, but it has somewhat vexed would-be advertisers more accustomed to developing ads to inject into programming watched on an actual television set rather than on smartphones or tablets. The Wall Street Journal reported earlier this month that 70% of its content is still consumed via mobile devices. Advertisers are hesitant because some types of ads are more effective than others, depending on the setting.

Google has finally appreciated this concern enough to do something about it, adding intuitively organized TV-centric programming to a new platform called YouTube Select.

YouTube Ads Vice President Vishal Sharma explained it best last month when he wrote:

...we're introducing a dedicated streaming TV lineup as part of YouTube Select in the U.S. to help brands reach their audiences where they are watching. Streaming TV combines the best of YouTube TV and lineups content, both on TV screens. That means being able to easily reach your audience with a single, scalable offering on the big screen.

The bulk of YouTube's videos may be still consumed via handheld devices or computers, but the 250 million hours of YouTube content watched on actual television sets every day is hardly chump change. For perspective, the last confirmed comparable figure from Netflix indicated its customers were only enjoying 140 million hours' worth of ad-free video every day.

It's a big collective step

Were it just any one of these four items on its own, the rumor or confirmed development (like YouTube Select specifically for TV-watching) might not even be worth mentioning. To see all four possibilities materializing at the same time, however, is telling as well as intuitive. A set-top box meant to serve as an alternative to traditional cable television should come with a remote, and that technology should make it easy to connect to a skinny bundle like YouTube TV. If Alphabet wants to become a serious contender as an alternative to linear cable, it should be able to assure advertisers their ads are relevant and effective specifically for the venue being utilized.

It's still the early innings of the ballgame to be sure. But it's not hyperbole to suggest these past few weeks mark the most -- and best -- effort Alphabet has ever made toward becoming a true TV contender.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. James Brumley owns shares of Alphabet (A shares). The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Amazon, Netflix, and Roku and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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