Google's Irresistible Potential as an Alternative to Cable
CEO Eric Schmidt is flirting with broadcasters and their love child could be beautiful
Google is launching some ambitious initiatives, and for the first time in a while, Facebook and Apple aren't in the crosshairs. On Friday, executive chairman Eric Schmidt will be cozying up to television executives at a conference in Edinburgh, just two days after Google is expected to make a bid to buy Hulu. Combined with hints that the soft launch of the much-anticipated, super fast broadband service Google Fiber is underway, it looks increasingly like Google wants to go head-to-head with your cable company. And with cable companies' consistently low customer satisfaction rate, Google's compelling-sounding offerings should dazzle the market.
The case for Google outcompeting cable companies starts with the content producers. Historically, Google has long been an enemy to broadcasters and movie studios for providing easy access to pirated content. As The Guardian's James Robinson explains, Google "smoothed ruffled feathers" by building advanced anti-pirating tools for YouTube and offering broadcasters a new revenue stream by selling advertisements against videos on the official broadcaster channel page. Schmidt's appeal this week is expected to warm relations further by focusing on how everyone wins with a closer relationship between Google and broadcasters.
"Good content drives search, and search drives advertising," writes Robinson. "The more compelling the content there is online, the more money Google makes. In Schmidt's view, that makes Google and the TV industry potential partners and, in the right circumstances, natural collaborators."
Google's expected bid for Hulu would make that collaboration work even more organically. While Google already has a video platform in YouTube, Hulu would offer existing contracts and relationships with networks that could bring more premium content into Google's network. The Wall Street Journal indicates that Hulu's current owners--which include the massive cable providers News Corp. and Comcast--have been "grappling with how to carve up rights to build digital businesses without cannibalizing their more profitable traditional ones," a problem that resulted in "diverging interests of the media owners and Hulu management" and eventually Hulu's decision to sell. Since Google isn't a traditional cable provider, they wouldn't have to worry about cannibalizing that business, an advantage that would would mean broadcasters could offer their content more directly to viewers. Google's gargantuan ad network would also make it easier for broadcasters to monetize their content online.
We don't know yet whether Schmidt's appeal to broadcasters will work or Google will buy Hulu. One thing seems certain: Google Fiber, the company's new broad broadband service, will crush the competition. First of all, customers hate their cable companies, but they love Google. Time Warner and Comcast, the nation's two largest cable providers, ranked numbers five and six respectively in the MSN Money's annual Customer Service Hall of Shame. Google, however, consistently tops the list of the American Customer Satisfaction Index. Meanwhile, initial reports from users show that Google Fiber looks like it will be ten times as fast as existing broadband providers like Time Warner.
Currently, most people pay separately for their cable TV and their broadband internet. With Google Fiber and partnerships with broadcasters, Google could bundle those services into one for the increasingly large group of viewers that watch TV online. Everybody would ostensibly win. Broadcasters would be better able to monetize their web content, while customers would get faster internet and better service.
So far, Google's attempts to join the television market has been awfully underwhelming, but they've depended on clunky set-top boxes that over complicated the user experience--though Google's recent acquisition of Motorola could lead to more elegant hardware. Regardless, Google looks like they're betting on a more integrated web-TV experience. If Google can manage to provide customers a direct link to content as well as the best performing service, they stand to be the most powerful cable cutter out there.