The new service offered by Google starting this Fall obviously won’t have immediate affect on its bottom line but long term implications may be significant.
Analysts chimed in on Google’s TV ambitions with mostly positive remarks on the new service.
Morgan Stanley’s (MS) Justin Post and Joyce Tran saw many significant long term upsides to the move, but pegged pricing (at or near AppleTV’s $200) as being the biggest factor to adoption.
- Android adoption
- More use of Internet, YouTube, and Google search
- Ability to serve ads in apps used on TV
- Share of revenues from any paid apps purchases made through apps
- First mover status
But they note that there are significant hurdles to overcome. As there were no cable companies at the event [Besides Dish satellite] they see resistance from the field. Also, there has been consumer resistance to a full keyboard remote, though the ability to control the TV with Android and other new devices like Logitech’s Dinovo Mini keyboard may change that.
Morgan Stanley remains bullish on Google (GOOG) with a price target of $685:
While investors would like to see more margin leverage in the model, we think Google’s investment initiatives are key for maintaining consumer mind share and long-term growth. The Android market is quite robust, and strong adoption statistics plus Apple’s apps success are the first evidence (after several failures) that Google’s non-search investment can build a mass-market platform with real monetization capabilities. We maintain BUY rating on Google, although we don’t expect material changes to estimates from GTV.
- Wide array of content streams including full cable and Internet functionality.
- YouTube’s “Leanback” feature which allows a more TV like browsing experience.
- Partnerships: Best Buy for distribution, Sony, Logitech hardware and Dish cable
- Aggressive pricing which will compete with AppleTV (AAPL) and Xbox ($200-300) on the high end and Roku and Seagate offerings ($80-$130) on the low end.
- Search interface is a compelling new paradigm for TV.
- Google brings together everything including Flash interface, games, apps,
Wolk sees the following challenges:
- DVR has only seen 33% adoption rates suggesting that cable customers aren’t likely to want upgrades
- Earlier WebTV offerings haven’t seen success (Windows Media Center, AppleTV, WebTV, etc)
- Hardware purchase may impede adoption
- Longer load times and weaker resolution of web-based video could deter usage rates by consumers accustomed to the immediate access and high performance of television/cable viewing.
- Google I/O demo was full of glitches. It isn’t certain if Google has mastered the user interface.
