Who will control the connection to the living room? Apple (AAPL)? Google (GOOG)? Cable? Satellite? Try the television manufacturers themselves. While many of the content and computer companies have been trying to attract consumers to their TV offerings, such old-line consumer electronics manufacturers as Samsung, Sony (SNE), LG, Vizio, Panasonic, Toshiba, and Mitsubishi have quietly made enormous headway in getting customers to connect sets to the Internet. Not just to buy sets that had broadband connections, but to successfully connect and register them. This will throw a monkey wrench into many business plans.
The television manufacturers have added networking connections to sets for years. What hasn't been obvious is whether consumers simply bought the capability and did nothing with it, or if they connected their sets to the online world. Apparently a lot more of the latter has happened than many might imagine. Shelly Palmer, who covers the television business, and got some interesting numbers from some companies. Samsung will sell 8.5 million Internet-enabled flat screen TVs this year and consumers will connect 5.5 million of them to an Internet connection within a week. Vizio will sell 7 million, of which 4.5 million will be connected and registered online in a week. Within the next few years, depending on whose estimates you use, the US alone will have at least 75 million Internet-connected TVs in use. Not separate households, of course, but still, that's a lot of direction connections between a favorite consumer product and the new source for entertainment.
Apple TV? Forget it, because those numbers say that a standalone box product has increasingly less interest to consumers. As Steve Jobs has admitted, people already have shown themselves indifferent to buying set-top boxes when they perceive themselves getting one for free from a cable, satellite, or telco service provider.
There is where Google TV has an edge. Although available as a standalone box, Sony has the service integrated with some of its sets. By being willing to give up control that it couldn't get in the first place, Google has a chance to piggyback off some of the manufacturers that now control the Internet connection to the TV.
Of course, if Apple is shut out because of its insistence on owning everything in a market where that doesn't work, Google has other big problems. Namely, patent suits that Apple and Microsoft (MSFT) have both filed against handset vendors that use Android as their operating systems. However, check some of the patents that Microsoft is asserting and you see that they potentially attack basic functions of Android, not just mobile-oriented operations. Because Google TV set integration seems to involve running Android, that could mean a tough time for manufacturers who decide to implement it. (LG has put its Android tablet plans on hold because it says that the current OS version isn't optimized for tablets. I wonder how much of the decision is also due to Android not being optimized for lawsuit defense.)
And so, the television makers will have a huge influence on the connection of TV and the Internet. If Apple's out and using Google is a potential lawsuit waiting to happen, who is left? I'd argue that smaller vendors who have been considered marginal now have a chance to quickly expand and possibly snatch a new market away from the giants.
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