The talk of convergence between the TV and the computer has existed for decades. Currently, there are two problems preventing this blending of technology: the TV does not have a native PC operating system AND most people use cable (or satellite) boxes to connect to content. The latter come with their own operating systems (which are pretty bad), eliminating much of the need for a native system within the TV. Even for consumers who hook up their TV’s to nettop computers, the user experience leaves a lot to be desired because you can only use one input (nettop OR cable box, but not both) at a time. Finally, the business case for convergence fails because of the requisite cost of including Microsoft’s operating system within a TV.
But Google’s Chrome OS may be about to change that. For one thing, Chrome OS is open source and does not require another operating system like Windows to run on top of (which Boxee, Jaman, and countless other TV applications do). To be clear, including Chrome OS within a TV would involve additional costs of manufacturing to include the necessary hardware to support full PC uses, but given Chrome OS’s substantial dependence on the cloud and targeting of netbook computers which represent the lower end of PC hardware, these cost increases are likely to be manageable.
As such, it will be economical for manufacturers to bundle Chrome OS within their TV’s (think of it as building a very large tablet PC), especially as doing so opens up the opportunity for additional monetization.
Premium Pricing
The digital TV space has become a low-margin commodity business. Efforts at charging premium prices have largely been tied to increased resolution, contrast ratios and other aspects of technical superiority. Yet consumers are largely ignorant of the marginal benefits offered by such technology and unwilling to pay premium prices for these technologies when lower-priced products without them appear to be “good enough.” By including the PC operating system within the TV, the manufacturers would be able to market the internet connectedness of their products (which they currently do not because they do not control enough of the value chain) and to charge a premium price for such products. Whereas most consumers have been unwilling to pay for resolution and higher contrast ratios, most consumers would be willing to pay extra to get the internet on their TV.
Better User Experience
Even though it’s technically possible to get the internet on your television, this capability is far from a mass market idea because the user experience is terrible. It requires a decent level of technical know-how and troubleshooting (particularly in display settings) to get everything set up and make it work. The inclusion of a PC operating system within the TV by the manufacturer would likely eliminate much of this leading to a dramatically better user experience. A good analogy here is using the internet on a mobile device prior to the iPhone: yes you could do it, but the experience was so bad that many people did not. Once the user experience improved, the numbers of people accessing the internet from smartphones dramatically increased.
The Tablet Market
Google rightly points out that for most people internet use is the leading activity on a computer, and this fact serves as the basis for the company’s development of Chrome OS. Much of the use-case for the tablet PC (including the CrunchPad and the iTablet) surrounds using the device in a living room setting when consumers are not in front of their computer and want something larger to interact with other then their phone. If consumers can use Chrome OS on their TV’s to connect to the internet, a leading use-case for the tablet will be effectively addressed by a different device that already exists in most living rooms, dramatically reducing the overall potential of the tablet segment. At the end of the day, most consumers would rather have a TV than a Tablet.
A Cheaper TV
Google already sells TV advertising but the product has always been the red-headed step-child to the much more expansive web advertising program AdWords. With Chrome OS on the TV, Google will have a huge opportunity to leverage its substantial advertising platform in the exact environment that people are most familar with consuming advertising: while watching television. In order to force the issue and compel purchase of these new TV’s, Google could work with TV manufacturers to subsidize the cost of the TV making them cheaper for consumers. The strategy is that by enabling the internet on the TV, more people would be performing Google searches, thereby bringing additional revenue to the company. It fits with the company’s stated strategy of “the more internet connected devices, the better.”
The need for a UI suitable for the TV
The one glaring omission in a TV strategy is Chrome OS’s GUI. As demoed, it appears optimized to run on netbook and laptop size screens. Obviously, Google or someone else would need to develop a better UI for people to use while watching TV. The challenge here is that Chrome OS is merely intended to connect to the internet, and does not allow installation of any native applications preventing applications like Boxee, Jaman from filling this void. Thus, whatever UI is developed will need to run as a web app OR Google will have to choose to allow native apps on Chrome OS.
Conclusion
Chrome OS is initially intended for the netbook segment, and while that may be the entry point into the market, I would wager that the TV segment will end up being a more lucrative one for Google and Chrome OS in the long run. People are already familiar with using a computer to connect to the internet, so users of Chrome OS will largely be engaging in activity that they likely would have done on a different device anyway. However, there is little precedent for using the internet while watching TV due to the difficulties already discussed. With Chrome OS running on your TV, Google will be able to convert TV watching into an internet-enabled activity where people are searching for content and consuming advertising as they do so, all of which generates revenue for Google.
