Sony-Google Internet-based TV faces tough road, analysts say

by Kazuaki Nagata

While the partnership between Sony Corp. and Google Inc. announced last week appears a good match, some industry observers say it remains unclear what kind of business model they are aiming for with the Internet-based televisions they plan to produce.

Under the deal, Sony will be the first supplier of the device based on the “Google TV platform,” which they say will seamlessly integrate the Internet and television. While several major companies have attempted this in the past, the concept has never really taken off.

Analysts say the key for Sony is whether it can create a new and profitable business model to make use of its huge software content, such as music, movies and DVD titles, in the Google TV platform, as well as creating other devices that closely work with the Google multimedia platform.

“For instance, if you can carry around content that you got from Google TV with a tablet computer, that could be a huge strength,” said Asumi Goto, an analyst at Daiwa Securities Co.’s investment strategy and research division.

If Sony and Google manage to produce such a tablet computer, the combination could enable the alliance to seriously compete with Apple Inc.’s iPad, she said.

But industry observers remain skeptical, saying the announcements from the two companies have provided few concrete details so far.

“I think the two companies and Intel Corp. share motives, but it is still unclear what kind of system they will create to make a profit,” said Hiroshi Sakai, an analyst at SMBC Friend Research Center.

On May 20, Google and Sony, along with Intel and Logitech International SA, told developers gathered in San Francisco they will jointly develop Internet televisions or a Google TV project.

The Internet TV will be powered by Google’s Android open operating system and use its Chrome Web browser.

According to Google’s promotional video, users can type in key words to search for TV and Web contents, saving them the trouble of scanning the many channels available in the U.S. In addition, the TV will organize users’ favorite contents.

The Google TV “is basically an entertainment hub that searches all of your channels, recorded shows, YouTube and other Web sites,” Google says in the video.

Under the deal, Sony will launch the first lineup of Google TV sets incorporating the Google TV platform in the U.S. market this fall. It is still undecided when the product will debut in Japan, according to Sony.

Sony and Google will also develop mobile gadgets in an apparent attempt to rival Apple Inc.’s popular mobile devices such as the iPad and iPod.

Through the partnership, Sony will benefit from Google’s search engine and Android technologies, while Google can rely on Sony’s electronics manufacturing knowhow and possibly its software contents.

SMBC Friend’s Sakai said the key will be to create an effective profit-making model, such as Apple’s iPhone and iTunes platform that have been successful in attracting consumers.

One possible advantage for Google is the open architecture of Android, which allows TV makers and software developers to freely use the Google platform.

“If this part becomes clear and works well with Android’s open style, many (application developers) can join the system, and it will be a win-win situation,” Sakai said.

Meanwhile, Japan may be a tougher market to crack than the U.S. for the Sony-Google alliance, given the strict copyright protection and the reluctance of local TV broadcasters to release contents to new players from the Internet industry, some experts said.

However, Goto of Daiwa Securities said that if a major broadcaster were to support Google’s concept and provide contents, it would alter the situation.

Joining the Google platform would provide benefits for broadcasters because it would allow them to directly and easily monitor content and protect their copyright benefits, she said.

“I think the concept (of the Google-Sony team) has a chance to become a hit,” said Goto.