According to the New York Times, Google (GOOG) has massively cut back its GoogleTV product’s planned releases from CES, which is to take place from January 6-9.  Toshiba, LG Electronics and Sharp were all set to announce products at CES running GoogleTV but will hold off until a newer version of the software, which will run apps, hits the market later in 2011.

Two manufacturers, Vizio and Samsung, will announce GoogleTV products at CES, however.  Samsung will announce appliances rather than TVs, while Vizio’s announcement will be more low key.

Sony (SNE) and Logitech (LOGI) both currently carry GoogleTV-based products.

The scale back at CES is Google’s doing, according to the report, and not the plan of the-manufacturers.  The search giant is re-tooling the software to address the concerns of reviewers and early adopters citing the complexity of the software, its inconsistent interface, and the lack of top content as problems with adoption.

Surprisingly, people don’t want to use a full-size keyboard as a remote in the living room.

After GoogleTV started shipping, one network after another blocked their content from GoogleTV viewers.  While some, like PBS, TBS, and Sony’s Crackle have stayed on board, the others, which include majors like NBC, ABC, FOX and CBS, have indicated that deals with the cable operators preclude them from distribution deals.

Hulu, which broadcasts content from ABC, NBC and FOX, has indicated they are working with Google on an arrangement to distribute their content via Hulu Plus, which has a monthly fee. Netflix (NFLX) currently works on GoogleTV (as well as much cheaper products like Roku ($60) and AppleTV ($100) and has content from most major networks, also at an additional price.

Google recently released an upgraded version of its GoogleTV product with more Netflix compatibility and Voice Actions for the Android remotes.  Sony and Logitech have both tried price cuts as a means to get more people behind the GoogleTV.  The reality is however, that as it currently stands, you can get most of what you see on GoogleTV for $60 with Roku’s excellent streaming player.

So, Google clearly needs to clean up its TV product.  But how will it get more meaningful content to its platform and, more crucial to Google’s shareholders, be able to sell advertising against it?

Google sees television advertising as one of its pillars of expansion but the industry, especially the part that deals with ad sales, is afraid of Google’s encroachment. With its ability to geo-target advertising and even to identify content and habits of users, Google ads should be more valuable to viewers, advertisers and content distributors.  But with another entertainment industry afraid of change it will be hard for Google to ramp up that virtuous cycle.