"I think that a companion 7- to 10-inch device in a home will become very important, [both] as an augmentation to your TV experience [and] also as a way of walking around the house and streaming TV to that device," Jha said. "I think we're very focused in participating in this convergence that's coming between mobility and home, and I think you will actually see some products from us in a very short period of time."
Is this the first emergence of a Google TV product? Remember, in Apple on the Margin I stated that Apple must diversify its earnings stream or face a multiple hit if they lose the smart phone wars? Well, we all agree that the iPad is the key, but the iPad will face the same problems that the iPhone is facing - and that's Android. Android will commoditize the space while adding functionality at clip so quick it will be nigh impossible for a fully vertical channel to keep up. Basically, the history of the Macintosh vs the Microsoft driven PS will be reenacted unless Apple alters its course, see A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple for our internal discussion on this topic. For those who are disbelievers in margin compression due to commoditization (despite the fact that the largest revenue and profit producing tech company in the world got that way through this fashion), I bring you the Meritline - you can buy 20 of them for 2,000 or buy them individually for hundred and change each!!!
MeritLine - Meritline.com is offering the 7" Google Android Internet Tablet with Android 1.7 in Black for $125 + free shipping. No tax in most states and this is the lowest price 7" Android Tablet we have seen.
The 7" Google Android Internet Tablet features a 800x480 7" widescreen touchscreen LCD, VIA WM8505 ARM926 + 533MHZ processor, 802.11g wireless, 256MB RAM, 2GB flash memory expandable to SDHC TF card 16GB, 0.3-megapixel camera, and more
You had better believe that tablets will get much better and much cheaper as more competition enters the space. Apple will have a problem with premium pricing when the cheaper product offers superior functionality. Reference the capabilities of the HTC Evo. HTC and Asus should be very formidable competitors in this space, for they are accomplished at offering high functionality and attractive design at rock bottom prices. The iPad's broad margins will be considerably more short lived than that of the iPhone. Still don't believe me? Well here are some more tablets (one even purportedly selling at Kmart now), ranging from $100 down to $30 - that's right! $30!
So, the question of the year is, "Will Apple be able to grow fast enough to maintain historical earnings momentum and outpace the Android?" Susbcribers, reference Apple iPhone Profit Margin Scenario Analysis Model and Apple business model note until next week when we start unfolding the hard hitting heavy duty forensic analysis and valuations. Others may click here to subscribe.
For more on Google TV, let's excerpt "The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift":
- Google TV – An attempt to capture a share of ~$70 billion television advertising market – the product is expected to be launched by end of 2010.
Google recently announced the launch of Google TV towards end of 2010. Its key features include:
o It is an Android based software platform that will place a Chrome browser on connected televisions, enabling television viewers to search for content directly from the Internet or from more traditional sources such as television networks, cable, or DVR-saved programming.
o It is also expected to provide applications like Picasa, Flickr, Pandora, or gaming sites by early 2011. Google TV is also expected to support Adobe Flash 10.1 – helping subscribers to have access to almost every online video, web game, or social network application on the Internet with particular support for services such as YouTube, Twitter, Netflix, and Hulu. Android Mobile OS v 2.2 will also feature this Flash compatibility, revealing a concerted cooperative effort between Adobe and Google to attempt to create a pressure point in Apple’s refusal to allow Adobe’s Flash content to run on its popular IPhone and IPad operating systems. This gambit very well may pay off if the consumer experience upon playback is satisfactory. This will bode ill for Apple considering the current IPhone backlash and the presence of the arguably technically superior technically superior HTC Evo.
o Google has already formed partnerships with Sony, Logitech and Intel to create hardware that will run the Google TV platform.
o For its distribution of Google TV, the company has tied up with Best Buy which will showcase the Google TV functionality in its 1000+ stores.
Financial Analysts View
Financial analysts are still waiting for more details of the service and are cautious as the IT industry is littered with previous web TV failures
o Financial analysts view this offering as a strategy to capture ~$70 bln television advertising market. However, for now they are largely biding their time before deciding if Google TV will live up to its buzz, given the number of unsuccessful efforts in the past.
o Moreover, price of the service and related hardware costs is another key factor which analysts are waiting for, as it will be a major consideration for consumer adoption.
According to Susquehanna Financial Group, “We view Google TV as a strategy to capture a share of the ~$70 bln television advertising market. While we are optimistic about Google TV’s longer term potential, we do not expect the near-term impact to be meaningful given potential challenges with consumer adoption, technology integration, and competition”.
In its May 2010 report, the Group has highlighted that Google TV’s technology features, its partnerships with Sony, Intel and Logitech and Google’s distribution partnership with Best buy, will act as a positive factors for the Google TV launch, while consumer adoption, past failures of internet based TV offerings, any technological incompatibility and willingness of studio-owned sites to share their content on Google TV, will remain near-term challenges.
Technology Analysts View
Technology analysts have given Google TV offering thumbs up, though some believe good execution remains the key.
o Technology analysts believe that the chances of success for Google TV are much higher than similar internet TV applications launched previously, owing to better technology, higher internet penetration and better online video content now, which is likely to support better customer adoption
o Moreover, Google’s partnership with leading hardware suppliers including Sony and Logitech further enhances the branding and quality of the Google TV service.
o Though the service is technologically advanced, proper execution from marketing to distribution to customer support will be a key driver for the success of Google TV.
According to Forrester’s James McQuivey, Google’s goal is to get into the TV advertisement marketplace, eventually appropriating a healthy chunk of the billions in advertising that flow to and through the TV.
On the possibility of Google being unsuccessful as previous internet TV attempts, he strongly disagrees, “Yes, it’s hard, yes it has been tried before, but no, Google TV is not in the same situation as Roku, VUDU, Boxee, or even Apple TV. Google TV is different; it’s more ambitious yet more likely to succeed. First of all, timing matters. With broadband penetration at two-thirds of US households — higher in many European and Asian markets — and with home networks in more than a third of US homes, the base layer of high-speed connectivity to and in the home can support Google’s ambitions. Plus, there’s enough content online between YouTube, Hulu, and Netflix, to make it worth the bother of connecting the TV (which, by the way, is why nearly 10 million homes in the US connect their PCs to their TVs to watch that content today, so Google’s asking us to do something millions of us already do).”
He further believes that the success of Google TV as a whole is not a mere combination of content and technology but also Google’s list of partners is what makes this worthy of consideration, “More to the point, it is Sony’s involvement that will cause everyone else to accelerate their own efforts. Competing TV makers will sign up by the end of the year, mark my word. Cable companies will speed up their TV Everywhere solutions to ensure that they don’t get pushed to one side. Most of all, Apple itself will have to respond.”
Digital Media Analyst, Ralph Schackart of William Blair & Co, believes evolution of the smart TV is intended to convert consumers’ big screen high-definition televisions into giant monitors for surfing the Internet. He views Google TV as a platform which will enable premium movie sales from many third-party stores such as Amazon VOD. Moreover, Google TV could help studios to deliver less expensive (higher margin) VOD (video-on-demand) movies directly through connected TVs, taking market share away from Redbox and Netflix.
Reggie Middleton’s View
Overall we view Google TV as a technologically advanced offering that has the potential to make a big change in the way television is viewed, if all claimed features reach the consumers and the company is able to meet the near-term challenges including:
§ Competitive Pricing: By marketing Google TV to consumers at a price point that supports faster adoption
§ Access to a wide range of Online Content: By making available all the online video related content freely accessible to its subscribers, i.e. making sure that key studio-owned sites such as Hulu don’t block access through Google TV (although they will be forced to compete with sites such as Amazon VOD [currently capable of producing a very wide variety of on demand HD content] and Netflicks) and;
§ Proper Execution: By providing best quality services with sustained customer support and maintenance.
Moreover, though the opportunity looks very promising over the long-term, it’s difficult to gauge its financial impact until Google comes up with more details of its service, primarily the pricing, distribution and customer support. I am bullish on the strategy as whole, for the web-based delivery of video, textual, interactive, social and associated rich media content easily has the potential to double Google’s ad revenue. It would be very difficult for Apple to mount a reply with such a large competitive advantage, although Microsoft’s ubiquitous presence in the home computer as well as the Xbox may be closer term threat.
More hard hitting, must read research on the Mobile Computing Wars:
- There Is Another Paradigm Shift Coming in Technology and Media: Apple, Microsoft and Google Know its Winner Takes All
- The Mobile Computing and Content Wars: Part 2, the Google Response to the Paradigm Shift
- An Introduction to How Apple Apple Will Compete With the Google/Android Onslaught
- Don’t Count Microsoft Out of the Ultra-Mobile Computing Wars Just Yet
- This article should drive the point home: An iPhone 4 Recall Will Hurt Apple More By Opening Additional Opportunity for Android Devices Than Increased Expenses
- A First in the Mainstream Media: Apple’s Flagship Product Loses In a Comparison Review to HTC’s Google-Powered Phone
- After Getting a Glimpse of the New Windows Phone 7 Functionality, RIMM is Looking More Like a Short Play
- Android is gaining preference as the long-term choice of application developers
- A Glimpse of the BoomBustBlog Internal Discussion Concerning the Fate of Apple
- Math and the Pace of Smart Phone Innovation May Take a Byte Out of Apple’s (Short-lived?) Dominance
- Apple on the Margin
- RIM Smart Phone Market Share, RIP?
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