Is Google TV a Yugo?

Purchasers of Google TV sets and set-top boxes (STBs) may be experiencing a bit of buyer’s remorse. It seems their new (and expensive) TV sets have yet to realize Google’s promise of any content from any place at any time.

In October, Google and Sony released, with much fanfare, the new Google TV interface. The system consists of specially-enabled Sony TV sets or a Logitech Revue remote control and STB. The technology promised access to about any kind of content imaginable in a user-friendly, browser-like interface. Google intended to deliver content from networks, OTA, satellite and the Internet through the system.

However, content owners had a different perspective. These companies expect to get paid for those programs. The result was when the networks’ premium content was pulled from the platform, Google TV became little more than Web on the big screen. Google executives responded to networks’ refusal for carriage by saying that program suppliers “misunderstood” their intentions.

Currently, ABC, CBS, NBC and Hulu are blocking full-length programs from being accessed via Google TV. Said one media executive, “The ecosystem in TV pays for the content. I’m not sure Google gets that. They are approaching this as if it’s an academic MBA project.” In early November, announced that viewers could use its service to bypass the Hulu block. It took about two days for Hulu to stop that backdoor entry. Now even is blocked from Google TV.

Google seems to have ignored some basic business practices.

First, content delivery networks, (cable, satellite and IPTV) are required to pay program owners for the rights to deliver content to viewers. As the recent Fox versus Comcast, gosh I missed the World Series battle emphasized, program owners are even willing to penalize viewers in order to force CDNs to share in subscription revenue.

Second, just because Google TV delivers the content via broadband doesn’t change the basic business model. The kind of pipe used to deliver content is unimportant to content owners. To them, it’s still their content, and they want to get paid however and whenever viewers have access to it.

Google TV upsets today’s pay-me-for-my-video-content business model. This skirmish between Google and broadcast networks is similar to what the Internet company is facing with news publishers. Large publishers like Murdoch and AP are trying to find ways to charge Google for access to the publishers’ news content. Those efforts have largely been unsuccessful. So far, Google is getting a free ride and sells advertising alongside the news developed and paid for by the publishers.

Google tried to apply the same model to video content. Only this time, the chaff hit the fan. Content owners demanded Google TV stop transmitting the programs.

The networks are hugely afraid that the advertising value of their content will be diminished by Internet delivery. Comparing Nielsen viewer ratings of programs viewed as broadcast versus Internet viewing shows differences by factors of thousands to one or greater. Because the networks charge advertisers based on the number of eyeballs delivered, anything (Google TV) that might reduce that number is seen as a challenger.

I’d sure hate to be a Google TV set owner. Instead of a portal to a world of entertainment, what they got was a large-screen Google Chrome Internet browser. These early adopters thought they were buying a content race car. What they got was a Yugo.