A great article by US TV blog NewTeeVee discusses how and why Google may move into the digital TV set top box market later this year.  Below are my own thoughts on how Google could bring fundamental change to how we watch and interact with TV, whilst destroying the existing business model for Sky and Virgin Media.

Are Sky and Virgin Media stifling innovation?

In the US the set top box market is more liberated and innovative than the UK.  US consumers are more likely to buy ‘after market’ set top boxes such as the highly successful Tivo, rather than be tied to their TV provider’s own equipment.  In the UK, aside from Freeview, we rely on Sky or Virgin Media to furnish us with set top boxes.

The Sky+ box is of course well loved, reliable and has brought digital TV recordering into the mainstream, but whilst TV providers control the supply of equipment they will only integrate services and features that protect their commercial model, stifling innovation in services that don’t earn them more cash.

TV can be delivered online – now!

The continual increase in UK broadband speeds is changing the digital TV landscape.  Services such as the BBC iPlayer prove that TV services can be delivered in high quality and directly to the viewer over the internet. Just yesterday the BBC announced the addition of HD quality TV programmes to iPlayer.

The success of the iPlayer has accelerated interest in so called ‘video on demand’ TV services which challenge the traditional fixed ‘TV provider to TV set’ scheduled broadcast model.  I can now watch The Apprentice at 3am on my iPhone and no longer need to plan my week around watching and record my favourite tv programmes. No need to subscribe to Sky or rent a V box off Virgin Media.  Watching TV becomes a more personalised experience, fitting around your lifestyle rather than the reverse.

The set top box is the gateway to a new TV world

The largest remaining barrier to the widespread adoption of internet based TV services is the relative difficulty in transferring TV and movies from your PC to your TV set. Watching TV on your laptop is ok, but it’s not suitable for family viewing.  Which family wants to crowd around a 13inch Dell laptop to watch Eastenders rather than use the 40inch HD Ready LCD TV in the corner?

Whilst equipment is available that can transfer content from your PC to your TV, it still remains the domain of the geek minority and it can be expensive, hard to set-up and complicated to run.

Apple recognised this gap in the market and launched the Apple TV set top box which lets you watch TV and movies, view photos and listen to music stored on your Mac via your TV. Whilst this is a step in the right direction, Apple’s motivation is similar to that of Sky and Virgin Media.  Apple wants to expand it’s own closed commercial model – iTunes. There’s no easy way to stream TV programmes such as the BBC iPlayer and the focus is on promoting Apple’s own movie rentals and other paid content.

Android to the rescue?

Enter Google.  Their Linux-based Android mobile phone operating system is being touted as the potential base for an open source set top box operating system that any set top box manufacturer could licence and build into their hardware.  Android TV could provide a common standard for web 2.0 type TV services as part of an open model that would allow any developer create apps or widgets that enrich the viewing experience or make it easier to find new TV shows or movies from anywhere or anyone in the world.

So called ‘mash ups’ of technology could open up all kinds of interactive viewing experiences. Think personalized channels and tv  show recommendations, search functionality that can find relevant content from the entire web, the integration of social media to tv viewing.  Imagine watching a football match and having the option to integrate twitter feeds from other people watching the game or viewing Flickr feeds  from photos taken by people at the match. How about a Google Maps mash-up that shows you the filming locations for an episode of Coast?

Just this weekend I was watching the Shanghai Grand Prix  whilst discussing it with friends on Twitter.  People are ready for these new services to be integrated.  Google’s ownership of YouTube also opens up a world of professional and amateur content that you could now watch  on your TV.

This type of innovation scares Sky and Virgin Media to death.  How could they monetize web apps that are already free? They would lose control of the content pipeline and ultimately lose the opportunity to charge a subscription for TV content.  They could simply become run of the mill broadband providers.

So how could this work and why would Google move into TV?

Google would obviously benefit from yet another advertising platform,  but it would also completely disrupt the media industry distribution model, fundamentally shaking up the roles of content producers, distributors and TV providers.

Google has built its huge success by offering excellent services for free in order to create a huge virtual marketplace for businesses to sell their wares.  With a worldwide base of Android set-top boxes Google could offer a free and open TV service that would rival any current TV provider.  All the viewer would need is a good broadband connection and a Google compatible set top box or Google-ready TV.

Google would then help viewers find the cheapest or free sources of content from anywhere in the world, and make peronsal recommendations of new content whilst making revenue from offering highly relevant advertising, from sponsored ad’s for movies to ‘rent’, through to advertising the latest new chocolate bar.  Google’s advertising would be far more relevant and personalised than traditional TV advertising because of the two-way nature of the relationship with it’s ‘viewers’.

On top of this, an open developer community could freely innovate thousands of new widgets and apps making the TV experience more rich and interactive by the day.

The traditional providers would try to resist this threat by hanging on to exclusive content such as Premier League football, but over time the sale of media rights would re-align to the new model.  Why limit the sale of content to a fixed distribution channel when you can offer it directly to the entire world?

The ultimate irony of this would be that Google would effectively perform a reverse take over of  the TV advertising market that they have been central in destroying over the past decade.

Anyone who knows me will realise that I am not Google’s biggest fan, quite the opposite in fact. However if Google were to facilitate a revolution in TV viewing I think it could only be a good thing for the rather chap on the street.  Whilst the model I present above would take time and investment to realise, I think it could be a reality within 2-3 years.

Let me know your thoughts.