Gaining a stronger grasp of the wireless market may be the primary motive behind Google’s $12.5 billion acquisition of Motorola Mobility Holdings, but the buyout’s impact on the cable industry is not to be underestimated.
If Google doesn’t end up spinning off Motorola’s settop-box business, the Mountain View, Calif., juggernaut
will be in prime position to tackle the TV sector in a way that wasn’t achieved with its struggling Google TV product.
That may not have been immediately apparent Monday as Google put the focus squarely on the importance of securing patents and integrating its Android operating system with Motorola’s hardware holdings. All CEO Larry Page would allow on the subject of set-tops came in a vague reference to what Motorola refers to as its “home” unit.
Said Page, “I think there’s an opportunity to accelerate innovation in the home business by working together with the cable and telco industry as we go through a transition to Internet protocol.”
But how exactly that “innovation” gets implemented could be hugely consequential, according to Dan Olds, an analyst with Gabriel Consulting Group. “This could be the tail that’s wagging the dog,” Olds said. “The set-top box is of higher importance to Google than anyone could anticipate.”
Motorola is one of the biggest suppliers of set-top boxes worldwide, but that hasn’t amounted to much of a distinction given the cable industry has long been criticized for saddling its subscribers with a substandard user experience.
Google can play a key role in accelerating the industry’s evolution to IP-connected boxes that can open up a range of possibilities, including seamless access to the Internet. It’s an evolution that’s already taking place with MSOs like Comcast, which went public at the Cable Show in June with hybrid and IP-connected strategies with which it is currently experimenting.
That said, cable operators may not be so enthused by the prospect of Google getting its hands on the cable biz’s infrastructure, especially because Google TV wasn’t exactly a winner. No aspect of the product escaped criticism, from its interface to its price, which has been steeply discounted. Sales were so slow that last month one of Google’s partners, Logitech, revealed that more people in the second quarter were returning the product than buying it.
But Motorola could give Google full control to execute its vision for marrying TV and the Internet rather than the limited reach that came through partnerships. Google TV could become what Tivo became to some operators, who began offering the service as a value-add option integrated into existing boxes rather than a standalone device struggling to find a spot in living rooms already overloaded with too many devices.
But Motorola could end up becoming a lot more than just a Trojan horse for relaunching Google TV. A foothold in the living room could give Google the pipeline to push YouTube alongside existing multichannel packages if the right deals can be done with cable operators. Whether piping in YouTube or even other video platforms like Hulu — especially if Google ends up acquiring it — the company could empower MSOs to counter the appeal of cord-cutting by making online-delivered content part of subscriptions.
Google may also be positioned to sell targeted advertising and measure viewership in a way more granular than Nielsen, which has been criticized for its less-than-exact ratings system.
“This can be a play so much bigger than just Google TV,” said Olds. “Google is willing to go after the TV market in more ways than one.”