GOOGLE DEVELOPING IT'S OWN BRANDED WIRELESS HOME ENTERTAINMENT MUSIC STREAMING SYSTEM, TO COMPETE WITH APPLE

Google is developing its own branded wireless music streaming home entertainment system, will compete with Apple

Google Inc. is developing a home-entertainment system that streams music wirelessly throughout the home and would be marketed under the company's own brand, according to people briefed on the company's plans.

The effort marks a sharp shift in strategy for Google, which for the first would time would design and market consumer electronic devices under its name. The company has mainly focused on developing the Android operating system that powers devices such as smartphones, tablets and televisions. It has also allowed other companies to build and brand the hardware that uses it.

  

Google plans to make a branded home-entertainment system, steps up the company's rivalry with Apple by adding a new platform for competition, George Stahl reports on Markets Hub. (Photo: Justin Sullivan/Getty Images)

The new Android device, along with Google's pending purchase of device maker Motorola Mobility Holdings Inc., also ups the ante in its ongoing tussle with rival Apple Inc., which also controls both the software and hardware process.

Google competes with Apple in the mobile market where the share of Android-powered phones grew rapidly to overtake that of iPhones last year, according to some estimates. Apple recently stepped onto Google's Web search turf by launching Siri, a voice-activated search feature on its latest iPhone. And Google over the past year has worked to try to catch up to Apple in other areas such as selling digital music, movies and e-books directly to consumers.

Google's entertainment device, in development for several years, is expected to be unveiled later this year, people familiar with the matter said.

It's unclear which retailers would sell the entertainment device, which would stream music from Google's online music-storage service and pipe it wirelessly to Google-designed speakers or other Web-connected devices in people's homes, according to these people. In the future, such a device could potentially stream other forms of digital media such as video, one of these people said.

Consumers would operate the Google system using a smartphone or tablet, they said. It's unclear whether the devices would have to be powered by Android.

A Google spokesman declined to comment.

Google currently offers and other digital media for sale online through Android Market, which rivals Apple's iTunes store.

Google has already been moving to take Android from mobile devices into people's living rooms. The company has worked with television makers to incorporate the operating system under the moniker Google TV, which lets people use their TVs to browse the Web for video content, among other things. But the technology, which has been adopted by companies such as Samsung Electronics Co. and Sony Corp., has been slow to gain traction with consumers.

One person familiar with the matter said Google was hoping to offer the entertainment system, which would bring a new revenue stream to the company, at more-affordable prices than a similar device made by Sonos Inc., which focuses exclusively on music.

The market for home-audio hardware, including basics like stereos and more advanced gadgets like the Sonos music-streaming system is worth around $8 billion a year, world-wide, according to an estimate from Sonos co-founder Tom Cullen, who adds that his company's annual sales last year totaled about $200 million.Mr. Cullen said. 

"I'd be stunned if they actually thought it was worth it, because it's peanuts for them."

Google generated about $38 billion in revenue last year.

One person familiar with Google's plans said the company hopes to increase the size of that market by selling products at lower price points.

The initiative, however, could bring Google closer to being in competition with hardware companies that use Android and are commonly seen as partners for the company.

Partnerships between Google and device makers have made Android the No.1 operating system in smartphones in the U.S. and helped Google to extend its Web-search engine and other applications into devices beyond PCs. Google doesn't generate any revenue from sales of the devices.

Google's Android unit is led by Andy Rubin, who once ran a company called Danger that designed handsets, including the Sidekick, which Google co-founders Larry Page and Sergey Brin have said they admired. Over the past year or so Mr. Rubin hired some of his former colleagues at Danger, including Matt Hershenson and Joe Britt, to lead Android's hardware unit.

Anand Agarawala, left, and Joe Britt demonstrate new features for the Android@Home program at the Google IO Developers Conference in San Francisco in May.

At a conference last year, Mr. Britt previewed two home-entertainment devices that are related to the product Google is expected to sell this year. Mr. Britt called them "Tungsten" devices and said one of them could be controlled by an Android tablet and used to stream music and to act as a "bridge" to connect with other home appliances and devices.

Mr. Britt said at the conference.

"Think about your home as a network of accessories and think of Android as the operating system for your home, a vision called 'Android @Home'"

He didn't say the company would sell the device.

The company continues to work closely with device makers. For every updated release of its Android operating system, for example, Google chooses one hardware partner and helps it design a "Nexus" device to showcase the operating system's newest capabilities. Most recently, Google launched the Galaxy Nexus smartphone, made by Samsung.

Google in 2010 tried to sell the first Nexus device, called Nexus One and built by HTC Corp., directly to consumers through its website. The company discontinued the effort several months later.

Google's new device would mark the first time it has directly overseen the manufacturing process, working with overseas hardware suppliers and selling devices to consumers.

Google has increasingly expressed interest in allowing Android devices such as a smartphone to control appliances and other home devices, including lights or heating systems.

COMMENTARY:   I wonder if Google founder Larry Page and Sergey Brin asked themselves, "What would Steve do?"   I don't like the idea of Google competing on the basis of price.  This runs counter to Apple's strategy.  We have already seen that offering lower-priced alternatives to the iPhone and iPad has had very little effect on Apple's market shares.  Apple is now No 1 in both smartphones and tablets and predicted to stay No 1 for quite some time.   

With Apple it has always been about designing products that their own engineers would love using, that are not only well engineered and designed, but are simple, beautiful and that "people will lust for," using former founder Steve Jobs' own words.  Will Google be able to put a "dent in the universe?"      

Apple has always been able to maintain the highest industry margins by offering products that are are well engineered and designed, outsourcing production, and continuing the total product experience through its own Apple Stores and great post-sale customer service.  The exceptions being the distribution of iPhone and iPad.  The iPhone was originally exclusively distributed through AT&T, but both the iPhone and iPad are now distributed by AT&T, Verizon Wireless and Sprint, and a few big box retailers like WalMart and Target.

The Google brand conveys an image of a company with the No 1 online search engine, which has also gained notoriety with the Android  OS and its ecosystem of apps.  Whether it can position itself as a hardware maker in the home entertainment market remains to be seen, and is very risky endeavor.  Apple was able to do this with smartphones, portable music players and tablets, but they did it with "magical" products that disrupted entire market segments.  I am not entirely convinced that Google can successfully carry out this new branded hardware strategy to fruition. 

 Courtesy of an article dated February 10, 2012 appearing in The Wall Street Journal

Comments

[Suzanne Kidd]

Google will be a new and competing brand for the Apple in the digital and technology world. They are a little famous than Apple because everybody searches even if others don’t have the brand yet

[Sell Gold Denver]

Looks like a really great project. I'm sure they'll improve on some usability issues.