Google Unveils Details About Kansas City TV Service
Analysts discuss how big a challenge Google Fiber, which lacks content from key Hollywood conglomerates, could pose for pay TV companies.
Online giant Google has provided new details on its plan to roll out a fiber network with high-speed Internet and cable-style TV services in Kansas City.
For $120 per month, consumers can get both TV and broadband services, the company said. The offer includes 161 channels, including HD channels, and tens of thousands of on-demand movies and TV shows, it said.
The initial lineup for the previously announced Google Fiber service does not include such popular cable networks as Walt Disney's ESPN, Time Warner's TNT and HBO, News Corp.'s Fox News Channel and AMC Networks' AMC though. It does, however, seem to include channels from Viacom, even though the entertainment company has been involved in long-running litigation against Google's YouTube, according to reports.
Google will also offer an Android tablet for use as a remote control as part of the service.
Analysts are now debating what effect the Google pay TV service will have on cable TV, satellite and telecom companies and whether it could be rolled out to additional markets.
"We don't believe the announcement meaningfully changes the longer-term U.S. pay TV or broadband competitive dynamic, although we could see some headline pressure," said Barclays Capital analyst James Ratcliffe. "We don't believe Google is interested in being a nationwide operator of physical networks (which is highly capital intensive and lower-margin than Google's core businesses), but is rather focused more on showing what can be done as a way to goad incumbent operators into more aggressively upgrading their networks."
BTIG analyst Richard Greenfield suggested though that Google may have bigger aspirations. "The launch of Google Fiber is clearly negative for Time Warner Cable (100,000 subs) and to a lesser extent Comcast (small number of subs)," he said. "The far bigger issue for the entire multichannel video/ISP universe is our belief that Google Fiber’s aspirations are far greater than the two Kansas City’s with a combined population of 600,000 people."
Summarized Greenfield: "We believe this is far more than a one-time 'science experiment'.”
As the dominant pay TV operator in the Kansas City market, Time Warner Cable "has the most exposure to the rollout, while AT&T has the most exposure from the telco side," Ratcliffe agreed. "We note, however, that the market is relatively small, representing only about 2 percent of TWC's subscribers nationwide."
Ratcliffe also commented on the content offers that Google has lined up so far. "While the TV offering appears to still be in flux, it doesn't include content from TW, Disney or News Corp.," he said. "Absent this content, we believe the TV product's appeal will be limited for many customers...We continue to believe that new video market entrants can get access to programming, but on terms no better than, and likely materially worse than, incumbent operators given new entrants' lack of scale."
Greenfield took a different stance. "We believe programmers should favor increased [pay TV] competition, especially after recent high profile battles with distributors," he wrote in a blog post.
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