way you get Gmail: through any ordinary Internet connection.
Foreshadowing a new challenge to entrenched cable and satellite
providers, Google is one of several technology giants trying to
license TV channels for an Internet cable service, according to people
with direct knowledge of the company's efforts.
No deals are imminent. But Google's recent meetings with major media
companies that own channels are a sign of the newfound race to sell
cablelike services via the Internet, creating an alternative to the
current television packages that 100 million American households buy
from companies like Comcast and Time Warner Cable.
Intel is hard at work on one such service and companies like Sony and
Microsoft have previously shown interest in the same idea, called an
"over the top" service because the channels would ride on top of
existing broadband connections. They need support from the channel
owners, though, and so far that has been tepid.
Google, which also owns YouTube, the world's largest online video
site, declined to comment on its television interest. But by
instigating conversations with channel owners about a service that
would compete with the likes of Comcast, the company is taking a
different tack than its rival Apple, which has been trying to
collaborate with both channel owners and their distributors on a TV
offering.
"Google feels the need to beat Apple to the punch," said one of the
people with direct knowledge of the meetings, who like the others
interviewed spoke on condition of anonymity.
Apple's thinking, according to these people, is that any
next-generation television service must be set up in partnership with
existing distributors, in part for quality assurance reasons. A future
Apple service could include a user-friendly interface layered on top
of Time Warner Cable or Cablevision's channel lineup. "Apple's working
within our current ecosystem," one of the people said.
What Google and Intel, and probably others, have in mind is more
disruptive and more difficult. One person involved in the talks with
Google cautioned that the company might end up just selling a library
of TV shows, the way Netflix, Amazon and Hulu already do. But others
said that Google has pitched an easy-to-use subscription service that
would stream a bundle of live channels as well as on-demand shows,
replacing the cable bundles that most households now purchase.
Google, an advertising company at its core, has tried to make a dent
in the television business before. Previous talks with channel owners
in 2011 went nowhere. An attempt at an automated TV ad-buying system
was shut down last year. Broadband in the meantime has continued to
become more popular and more widely available, spurring interest in
alternatives to traditional television distribution.
Google's renewed push was first reported by The Wall Street Journal
Tuesday afternoon. Intel is trying to create a similar over-the-top
service, but it has run into roadblocks set up by Time Warner Cable
and other incumbent television distributors. These include contracts
between existing distributors and some channel owners that prohibit
the channels from being licensed to new competitors like Intel. An
Intel spokesman declined to comment on Tuesday.
Another challenge involves channel owners like the Walt Disney Company
and Viacom, who could stand to benefit or suffer greatly from the
potential service, depending on how it is developed. Some owners doubt
that there is much of a market for cable via the Internet in the first
place, and they are content with the three methods of distribution
they have today: cable companies like Comcast, the satellite providers
DirecTV and Dish Network, and the fiber optic providers Verizon FiOS
and AT&T U-verse.
But if Intel, Google or another firm succeeds in selling a cablelike
bundle, some of those existing distributors would almost certainly
start doing the same thing. That would represent a sea change for the
cable industry, whose firms have historically stayed with their own
regional footprints and avoided direct competition with each other.
One of the reasons DirecTV recently tried, unsuccessfully, to buy Hulu
was because the Web site could have helped position the company in an
over-the-top marketplace.
One of the country's smaller cable companies, Cox Communications, is
already trying what amounts to this service in Orange County, Calif.
There, the company recently started selling a bundle of nearly 100
channels to its customers who have broadband but not cable TV. The
company has called it a "small trial," and it declined to comment on
its status on Tuesday.
"We are still early on, results and customer feedback will determine
if we proceed with any future plans on this product," Todd Smith, a
Cox spokesman, said.
A cable service delivered via the Internet would most likely have to
compete on quality — say, superior features like more space for
digital video recording — rather than on price. That is because, as a
Government Accountability Office report on the marketplace put it last
month, "networks generally offer significant discounts based on the
number of subscribers a provider has. Thus, a substantial disadvantage
that an entrant has relative to a large provider is that it will
likely have higher programming costs, making entry challenging."
But Google, Intel and the others eyeing the television space are
deep-pocketed giants. And they have another thing going for them: in
customer satisfaction surveys, they are a lot more popular than the
cable guys.
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