Google TV May Benefit From Google-Motorola Merger

Google's acquisition of Motorola Mobility will give it set-top boxes it could parlay into better products for Google TV. That's assuming Google keeps those hardware assets.

Google's (NASDAQ:GOOG) $12.5 billion purchase offer for Motorola Mobility (NYSE:MMI) is regarded by most industry watchers as a bid to secure patent protection, but one of the ancillary benefits is an opportunity to fortify the search engine's Web television service.

Unlike the new Google+ social network the company appears to have poured its heart and soul into, Google TV is struggling to gain significant traction. The service uses Android software and the Chrome Web browser to let users surf TV channels and Websites and access Web applications in the same context.

Google TV is integrated in TVs and Blu-ray players from Sony, as well as in the Logitech Revue companion boxes. However, those boxes are failing to sell at a healthy clip, and Logitech discounted them to $99, or one-third of what they cost at launch last fall.

Google TV can use a spark, and Motorola may be able to provide it. In addition to building the first signature Droid phone, Motorola has a large set-top box (STB) business, selling cable boxes to TV providers such as AT&T U-Verse, which uses them to deliver its services to users.

Just as Motorola puts Android in its phones, the company could insert the Google TV package in its STBs, or at least build new STBs with Android and sell them.

"Motorola is one of the two big set-top box players in the U.S. market, the other being Cisco's [NASDAQ:CSCO] Scientific Atlanta division," Current Analysis analyst Avi Greengart told eWEEK. "Getting into set-top boxes was not the purpose of the Google-Motorola Mobility acquisition, but it could have some of the most interesting results, as it could significantly advance Google's position in the digital living room."

ABI Research analyst Kevin Burden agreed, noting in a research brief that while Google TV has been viewed by many industry watchers as experimental, Motorola has long had a "TV everywhere" solution.

"Google, in contrast, had its foray into this space with Google TV seen widely as an experiment. A tie-up between Google and Motorola could give Google the expertise it needs to be taken seriously and gain an eventual foothold in content delivery to the home," Burden added.

Credibility and intellectual property and engineering talent in digital TV will go a long way, but that isn't the only thing Google will gain for its fledgling TV service. Motorola has tight relationships with cable companies, managed service operators (MSOs) and broadcasters, Gartner analyst Michael Gartenberg told eWEEK.

"Google showed a lot of arrogance with Google TV with a sense of 'We're going to co-opt that business and take control,'" Gartenberg said.

"Now they have another story to tell about how they can go after this market together. How they can deal with MSOs the same way they've dealt with carriers in the past. It's not necessarily about co-opting their business, but about partnering with their business."

Of course, we might do well to curb our enthusiasm, said Greengart, who added:

""Google TV today answers a question that few consumers seem to be asking. The bigger challenge may actually be getting this to consumers. Even if Google can come up with a compelling consumer value proposition, it may not be able to get it into the living room. The set-top box customer is not the consumer but the MSO. Cable companies have not always been looking to add OTT (over the top) options to the hardware that they buy and rent to their subscribers. Google will also have to provide a separate value proposition to MSOs that compels them to order Google TV enhanced set-top boxes rather than regular ones.""

Indeed, just because Google will have the assets doesn't mean it will manage them within the realm of our expectations. Certainly no one saw it bidding to buy one of its top Android OEM partners. Google could just as easily sell off Motorola's phone and STB businesses and simply keep the patents.

Like so many other things with the Google-Motorola merger, including the question of whether or not federal regulators will pass it, the deal is up in the air.