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Google Inc (GOOG) Taking Another Crack at Your Living Room

Google Inc (NASDAQ:GOOG) is determined to get into the battle for the last great entertainment frontier – the living room. There is no question that television has been a staple in American households for going on 50 years now, yet it remains an important tool in entertaining families. And as television and the various forms of entertainment have evolved over the years, digital TV has become hugely important to many tech companies.

Microsoft Corporation (NASDAQ:MSFT) has made inroads with its Xbox console, which allows for streaming movies and prior-run TV shows through Netflix, Inc. (NASDAQ:NFLX) or Hulu, as well as providing gaming opportunities and some music streaming. (We have documented  much of this progress.)

Apple Inc. (NASDAQ:AAPL) has been working diligently on its own Apple TV service after its set-top box concept has been  generally panned for its relative lack of success. But Google Inc (NASDAQ:GOOG), which has developed a strong Larry Page and Eric Schmidt, Google Foundersmarket-share advantage in mobile computing with its Android operating system, is now looking to recover from the Google Q debacle (remember the black ball that never got off the ground?) and upgrade its current Google TV product into something that resembles cable TV.

Apple Inc. (NADAQ:AAPL) and Intel Corporation (NASDAQ:INTC) are among the handful of companies that are very actively working on these similar  systems, where these tech companies look to secure licenses to stream cable programming and rovide similar features as cable TV but with a web-based interface and ease of flipping through channels.

With the deals the networks currently have with their distributors and the cable companies, there has been a lot of resistance  to the idea of on-demand pay-TV options, even as it seems the way of the future. Breaking up an established ecosystem is very hard to do without a special value proposition that these channels won’t get through the cable companies.

Google Inc (NASDAQ:GOOG) is trying to sell its product, sources say, but conducted some live demos for prospective partners, and it has been working on establishing a web-based, broadband TV service through its Google Fiber project that is currently running in the Kansas City area as a lab experiment.

The big hurdle for Google Inc (NASDAQ:GOOG) and other companies trying to get into the TV business, is that these media network companies are very reluctant to offer licensing for individual networks so that customers can take an “a la carte” approach to TV – being able to pick the channels they most likely watch and paying only for those. That would mean huge change in the TV market.

If Google, Apple Inc. (NASDAQ:AAPL) and the rest are left with the same bundling that cable companies currently provide and pay for, then that won’t make web-based TV much different from cable and thus would not justify any customers switching.

But if Google Inc (NASDAQ:GOOG) was able and wiling to pay higher licensing fees for the more popular channels in order to offer an “a la carte” option, that could mean that customers may pay similar rates for fewer channels than cable.

What are your thoughts about the options for digital TV? Would you switch from cable to one of these other providers? What would it take for you to switch? If you were an investor in Google, like fund manager David Tepper (see his full equity portfolio), would you advocate  delving into this market? Let us know in the comments section below.

DISCLOSURE: None

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