The new TV age: More than Google versus Apple

news analysis The living room is the latest Apple-Google battleground for a stake in the consumer television market. But ambitious strategies and advanced technologies aside, content will be the driving force behind mass consumer adoption, say analysts.

The race between the two tech giants is heating up, with Apple having unveiled a new iteration of its Apple TV on Sep. 1. The Google TV interface is on track to launch in the United States come October.

Adrian Drury, Ovum's lead analyst for media, broadcast and telecoms, told ZDNet Asia in an e-mail interview that at the end of the day, consumers are looking for "great" content.

"A brand new technology platform underneath the TV is not so important," he said.

His sentiments were akin to those expressed by Brian Marshall, analyst at Gleacher & Co., who said in an interview with Bloomberg last week that he did not expect the way consumers view content in the living room to be revolutionized, at least not for a couple more years. The pressing issue for the industry, Marshall noted, is the lack of good broadband penetration into the home and the need for more content.

Different approaches
Fundamentally, Google and Apple have employed different philosophies to redefine the consumer-home theater experience.

Tim Chuah, program manager at Frost & Sullivan pointed out that Google TV is aims to "turn the traditional TV set in your living room into a PC" with its Android mobile operating system (OS), whereas the new Apple TV is "an additional way to access the iTunes ecosystem" and stream content such as photos, music and video, directly to one's high definition television (HDTV).

According to Chuah, Apple's rationale is that people don't want a computer on their widescreen TV, which is meant for entertainment purposes.

A Google spokesperson told ZDNet Asia in an e-mail that "Google TV brings the best of TV and the best of the open Web, including a full Web browser (Chrome), into a single, seamless experience through cross-platform search". Currently, the Web still has a limited presence in the living room but with Google TV, consumers can "seamlessly navigate among their TV, DVR and the Internet on the best screen" in their homes, she added.

Apple did not reply by press time.

Google TV a 'bigger' bet
Calling Google TV "a hugely ambitious strategy", Ovum's Drury said the Web giant's effort is a "much bigger, higher bet" than Apple TV.

"Google TV wants to own the primary high-definition multimedia interface (HDMI) input into consumer TV sets to revolutionize how the average TV user interacts with the big screen in their living room," he pointed out.

Google also aims to index and arrange all services and content--from the Web to pay-TV and free-to-air operators--vying for audience attention, such that consumers don't need to keep switching between boxes and have the freedom to view the content they want whenever they wish.

In addition, the massive audience volume of YouTube gives Google "leverage to secure rights to distribute professionally produced content", he noted.

Frost & Sullivan's Chuah explained that Google's vision is to "become the key entry point, the gateway to the Internet, right in your living room". Hence, by comparison, Apple TV appears to have "fewer functions".

Concurring, Drury said Apple TV's offering is more "conservative". One indication of this, he added, is that the new Apple TV is now US$99, less than half the original US$299 tag in 2006.

Drury explained that Apple TV, in that sense, is eyeing "the secondary HDMI input only". It is intended to "sit beside"--not replace--the consumer's existing primary broadcast content providers. As it lacks a hard drive, Apple TV is betting on streaming, rental-only service in a la carte style: rentals for TV episodes cost US$0.99 each while movies rentals start from US$2.99.

Google, he added, is also eyeing a share of the "larger global broadcast advertising revenue".

And since Google can pinpoint ads the same way it does them online, it has the opportunity to "price these ads higher", added Chuan from Frost & Sullivan.

To do that, Google will need to have a "sophisticated box" that can perform all these tasks, Drury pointed out. Partnerships with big names--Sony to build Google TV-compatible HDTVs and Blu-ray players, Logitech to build standalone set-top boxes, and Intel whose Atom processor will power the devices--are an "upside" for Google, because it gets to leverage on these third parties' engineering and manufacturing competencies, as well as their retail and distribution channels.

Apple's strength lies in ecosystem
With its 'stream, rent-only' model, Apple TV appears to have a considerably a muted strategy than Google's, noted Drury. But, Apple is in the first place "not betting the future of the company on the living room". Instead, it is focused on its family of "mobile devices, operating systems and the App Store", he said.

Apple proprietary iTunes network, he added, gives Apple TV a "strategic subtext" that can counter Google TV by "turning the living room TV into [another] iDevice accessory", a new addition to the existing devices in the Apple iTunes ecosystem.

According to Drury, Airplay, Apple's upcoming Wireless Local Area Network (WLAN) media streaming application, is a "major feature" in the upcoming iOS update which enables users to stream content from an iPad, iPhone or iPod Touch directly to a HDTV set.

What Apple is doing, he summarized, is "leverage the network effect, its installed base of iTunes customers, and potentially its App Store distribution channel of 120 million iDevices".

Gleacher & Co.'s Marshall, in his interview with Bloomberg, estimated that the installed base of all the devices running iOS 12 months from now will reach about 200 million. "You can almost think of Apple as a 200 million subscriber cable company--that's a pretty enviable position," he said.

Frost & Sullivan's Chuan echoed a similar view: "Apple already has a significant enough customer base to target with Apple TV."

Room for both
Chuan added there is a high chance Apple TV and Google TV can co-exist in the Web TV market because they "cater to different segments of the market". In addition, there are both Apple and Google fans out there, he pointed out. "It's like how smartphone users can choose between iPhones and Android phones."

For now, predictions of the overall outcome of the Web TV market could go either way, Drury said, noting that pricing for Google TV has not been announced.

But he stressed that the fluctuations of "evolving consumer behavior" would certainly have an impact and that the go-to market for Google TV would definitely be an iterative process. "Google will have to navigate the incredibly complex web of vested interests in the home entertainment market as well as a historically conservative end-consumer market."

The track record of the first Apple TV is an example, noted Drury. Introduced in 2006 to tap the Web TV market, it failed to win over mainstream audiences. Even Apple CEO Steve Jobs himself admitted that it had "never been a huge hit".

The second-generation Apple TV needs to "generate enough interest" and heavily promote the potential of Airplay’s wireless technology, said Drury. That, he pointed out, may seem an easy task since "product marketing is a strong suit for the guys at Cupertino".

Competitors not standing still
Both Ovum and Frost & Sullivan agree, however, that the Web TV field is not confined to Google and Apple. Competitors are reacting--and growing.

Riding on the hype of the new Apple TV's September debut, New York-based startup Boxee announced that its first set-up box Boxee Box would hit shelves in November for US$200. Boxee, better known as an open source media player whose software allows users to bring online content to their televisions, roped in hardware company D-Link to manufacture the device.

Calif.-based consumer electronics company, Roku aggressively slashed prices of all its Internet video streaming set-top boxes in late August. Its basic, mid-range and top-end boxes now cost at least US$20 cheaper and offer similar functions to Apple TV, which may help it expand its small niche following to strike impulse-buyers.

Smaller and lesser-known players like Roku and Boxee don't tout replacing the orthodox cable TV model. And unlike Google TV or Apple TV, they are seen as less of a threat to pay-TV content providers as well as mainstream audiences because they cause only a slight change in the TV-watching status quo.