Analyst Comment: What Does The Acquisition Mean?

Smaller STB Vendors Must Innovate. Responses among rival set-top manufacturers was centered around Motorola’s set-top solutions and other TV products. Amino CEO, Andrew Burke, wrote a blog post about the acquisition calling Google the “enormous Search Serpent” and questioning the benefits of partnering with the combined company, rather than charting their own course. Of course for many smaller set-top companies, competing against a company like Google/Motorola will be much more difficult. Companies like ADB, Amino, Entone and others must drive innovation in order to succeed, or simply cater to smaller TV Operators.

Google Gains From Motorola’s Acquisitions. In the last few years, Motorola has expanded into the TV and IPTV space via a variety of acquisitions. Via recent acquisitions, it now owns Dreampark (middleware), BitBand (VOD), SecureMedia (content security), as well as many other companies. Google, of course, acquired Widevine for its content security solution. So the combined Google/Motorola company will have a huge presence in many IPTV verticals.

Google Becomes Competitor and Partner. To many companies, Google has now made as many enemies as it has made friends. Ever since the unveiling of Google TV in 2010, many studios and content owners avoided getting involved with Google. There’s already a feeling from many outside Silicon Valley that Google is getting too powerful and that adding Google TV would give away too much of their advertising revenues. After all, Google does make most of its revenues in advertising and search, and TV is a US$70 billion a year advertising business. So despite the acquisition of Motorola, Google must still tread carefully, and earn the trust of TV Operators, other Vendors and movie studios.

Motorola Has Strong Ties in Cable. Google benefits from Motorola’s longstanding and favorable relationship with Cable Operators and Broadcasters. However, some TV Operators are looking at using cloud-based services to deliver TV to consumers, with Comcast saying that there would not be a need for set-tops under its upcoming “Xcalibur” cloud TV project. So even though getting into the set-top business is a great way to get Google TV into more homes, the future of TV means a need for fewer set-tops. Or at least a re-imagining of what future set-tops should look like.

Android is the Future of Google/Motorola. Android is clearly a huge reason for the acquisition, and not just for Motorola’s mobile phone business. Google will clearly push Android into Motorola’s set-tops, incorporating Google TV into them. Android already has a large mobile market share (as does Apple’s iOS) so moving it to the TV screen is a no-brainer. The bigger question is whether TV Operators will welcome this move. And can Google turn around Google TV to make it more attractive to Operators?

Analyst Comment: Now that Fox is making consumers wait 8 days to catch-up on TV shows, it’s possible that other broadcast networks (ABC, CBS and NBC) will do the same. Considering Fox (via its parent company News Corp.) is an owner in Hulu, it seems difficult to understand the business decision behind this move. Perhaps they expect viewers to a) just wait 8 days or b) subscribe to Hulu Plus. However, the unintended consequence was that viewers started using BitTorrent to access Fox TV shows. Many times, BitTorrent sites posted new episodes just a few hours after airing, rather than the next day (or 8 days).