Google's Cable TV Plan: Gamble or Gambit?
In a move that could be a bold bet or a gambit for misdirection, Google (NASDAQ:GOOG) is reportedly mulling offering paid cable TV services as a way to build out its ultra-high-speed Internet service.
The Wall Street Journal said the search engine provider has engaged in "exploratory" discussions about launching such as service in Kansas City, Mo., and Kansas City, Kan., with TV powerhouses such as Time Warner and Walt Disney.
Kansas City beat out almost 1,100 cities clamoring to be the guinea pig for Google's proposed broadband test, which will bring Internet access speeds of 1G bps to thousands of homes in the city.
Google declined to comment, but putting the obvious pieces together makes it clear why the company would be interested in beefing up its high-speed broadband access.
Faster Internet connections open new opportunities for programmers to write gaming applications and other graphically intensive programs. Google's own YouTube video-sharing service would benefit greatly from speedier data facilitation, generating more video views and more ads served on TVs and set-top boxes running the Google TV service, which lets consumers access TV content with Web applications.
Google is producing fresh TV content with its YouTube channels, which it plans to serve via Google TV, ideally to tap into TV's huge advertising market. But Google lacks major, mass-produced TV content traditionally controlled by the cutthroat cable TV providers, including Cablevision, Charter, AT&T U-Verse, Comcast and Verizon FIOS.
Tapping Disney, Time Warner and other providers would give Google access to high-quality content to lure users to the combination of Google TV and high-speed broadband.
This would help the company compete with video services from Amazon and Apple, which is expected to launch a major Web TV platform in 2012. Google could subsidize such a service for consumers to undercut the pricey TV services from incumbent providers.
Analysts are dubious about Google's cable TV gambit, especially at a time when Google TV has yet to lure many consumers to its fold.
"I think Google is experimenting with the network they are deploying, and it is just that-an experiment," Gartner analyst Van Baker told eWEEK. "I sincerely doubt that Google has any real intent in getting into the cable television business, as that would be very far afield for them."
All too true, though the advertising dollars are clearly too lucrative for Google to ignore at a time when growth for its search ads has slowed, while Facebook's social ad revenue is expanding at a healthy clip.
Moreover, Google has an affinity for kicking the tires on services that can disrupt existing market paradigms. See the company's bid to market and sell its Nexus One smartphone unabetted by phone carriers (that didn't work out so well).
Sanford Bernstein analysts Craig Moffett and Carlos Kirjner put forth a compelling case against Google offering cable TV service in a research note Nov. 4, echoing Baker's angle that Google is merely using its high-speed Internet play as a research experiment.
This play will help Google push for faster broadband Google, which would lead to more Internet searches and ads served. Google would also be able to test newfangled, rich ad units on speedy broadband and figure out how to build its own infrastructure, Moffett and Kirjner explained.