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Android TV and ‘The End of the Beginning’

“This is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.”

—Winston Churchill

There was much discussion last week about Google’s latest attempt to address the TV-as-an-app space, Android TV, which is as interesting for what it isn’t as for what it is.

First, it’s not a box built by a contract manufacturer for Google. Given the strength of the open source (i.e., free) Android operating system with CE original-equipment manufacturers, Google has decided to extend that model to the TV space. That means allowing third parties to build Android TV devices, either as standalone Internet settop boxes or integrated directly into smart TVs.

Second, Android TV has little or no relationship with legacy pay TV. Unlike previous iterations of Google TV, which tried to overlay Google search on top of pay TV via HDMI pass-through, Android TV bypasses legacy TV altogether and focuses instead on apps.

In my view, both of these are good, safe choices. Moreover, the launch of Android TV marks the end of the “hobby” stage of TV-as-an-app and the beginning of mass-market consumer deployment.

Why does this matter? Two reasons come to mind.

(1) The operator interface is in big trouble: Technology shifts happen via a combination of divergence and convergence. For the past decade, broadband video has been a series of experiments, many of which have failed (e.g., Google TV). Once the industry identifies a successful model, however, the main solutions converge, and the market takes off . Consider, for example, how the personal computing industry converged around the desktop interface (plus mouse) in the mid 1980s after a decade of divergent experiments. More recently, the smartphone industry converged around the combination of the touch screen and downloadable apps from an app store, again after a decade of failed experiments.

I believe the smart-TV ecosystem is now reaching a similar point. All the major “Big Four” platforms (i.e., Apple, Amazon, Google and Microsoft) now offer essentially the same vision: a consumer-driven interface based on a combination of personal content recommendations (i.e., particular shows or movies) and TV apps. More importantly, all of these platforms rely on a device owned and controlled by the consumer (i.e., “bring your own device” or “BYOD”).

The point? Once convergence happens, even big companies with strong, legacy market positions find it difficult to buck the tide. IBM once controlled the computer industry, but quickly lost influence to the combination of Microsoft and Intel (the famous “Wintel”).

Mobile operators like AT&T once controlled all services used by their subscribers, but quickly lost influence to Apple and Google. The same thing is likely to happen to the operator-controlled settop box. I believe consumers are going to move their video consumption away from these boxes in droves, leaving them (and the plastic remotes that go with them) plugged in and turned on, but increasingly gathering dust beneath the living room TV.

(2) Pay TV will be marginalized: The opposite of love is not hate. It’s indifference. Android TV and other “Big Four” TV-as-an-app platforms don’t hate pay TV. No, it’s worse than that. They ignore it altogether. That is, if they control the underlying consumer experience, it matters not whether you have access to pay TV or some other video service. There is no program guide. There are no linear channels. There is no DVR. There is no operator video-on-demand — that is, unless the operator provides an app and competes with all the other (online) VOD services.

A user’s access to particular apps (e.g., HBO Go) or to particular content within apps (e.g., certain games on WatchESPN) is predicated on whether the user has a “TV Everywhere” authentication credential. This is peripheral to the user experience, however, and whether the user has such a credential (or where they got it) is really not of concern to the platform itself. The result is subtle, but chilling.

On the one hand, Android TV poses no threat whatsoever to pay TV and can play nicely with the existing “TV Everywhere” ecosystem. On the other hand, the new user experience renders current pay TV services pretty much irrelevant. The longer-term impact this will have on consumer perceptions of pay TV features, bundles and value is uncertain, but it is potentially enormous.

The latest version of Android TV has solidified the basic building blocks of the future of television: consumer versus operator devices (BYOD), Big 4 platforms and TV-as-an-app. There is still a long way to go before this all comes together, and deploying and optimizing these platforms will take the rest of the decade (and beyond). That said, the pieces are falling into place faster than many perceive.

Joel Espelien is a senior adviser at The Diffusion Group, a Plano, Texas-based research and advisory firm.