Google + Motorola Video Solutions: A Bridge Too Far
Colin Dixon, Senior Partner, Advisory
August 16, 2011
Much of the discussion around the Google’s Monday purchase of Motorola Mobility for $12.5B has focused on intellectual property (patents) and mobile phone synergies. However, as Will Richmond pointed out on Monday, the Video Solutions group – part of Motorola Mobility and comprised of set-top boxes and PayTV operator infrastructure – produces almost one third of the annual revenue of the company. While the synergies between mobile solutions and intellectual property rights (IPR) may be clear, this is hardly the case in regard to video solutions. I might go as far as to say there aren’t any synergies at all.
The Video Solutions group within Motorola Mobility has a very old heritage. The core of the technology comes from a company called General Instruments which was purchased by Motorola back in 1999. This group has been producing technology for the cable industry for decades and has become a trusted partner in the process. So much so that operators share their long term technology and content plans with them. Motorola/GI technology has been key in the delivery of the rock-solid reliability and the 500-channel selection that has put cable in most American homes today.
The way GI/Motorola has been so successful with cable over the years is by evolving the core technologies slowly and methodically, be it video delivery, security, or the set-top box. With every change made, the company took the time to ensure everything worked 100% of the time, was backward compatible with what was already in operator networks, and could be smoothly deployed by the operators. This approach required a lot of time. New STBs were years in the making, and software updates and changes, likewise, could easily take a year or more.
How will the Video Solutions group deal with the Google culture of fast-moving technical innovation; where software release cycles are measured in hours and major technological efforts in a few months? To say the least it will be a shock. But more likely it will lead to frustration and failure.
Some have said this represents an opportunity for Google TV to help operators make the leap into Internet Protocol (IP) delivery. But the likelihood of Comcast deploying an STB with Google TV on board is slim to none. First, Google TV includes an open browser. This is viewed by content providers as a direct assault on the traditional broadcast channel. Have we all forgotten how quickly broadcasters blocked playback of their video through Google TV’s browser? Second, the new release of Google TV will include Android Market. This “open market” approach to applications flies in the face of the tight control cable company’s exercise over their networks and their business. Finally, getting operators to deploy the more-expensive Google TV-powered boxes with Android operating systems will be next to impossible in anything less than 2-3 years, even if the companies have the will to do it. And I’m willing to bet they don’t!
All-in-all, this is a bridge too far. Motorola STBs will not be the savior of Google TV. Cable operators will not let Google into their networks to sell applications, advertising, or anything else for that matter. The idea that Brian Roberts (Comcast CEO) would sit down and share his detailed network hopes and dreams with Larry Page – as he has in the past with Motorola - is frankly ridiculous. Google would be better off selling the video solutions group as soon as possible. I can think of some likely suitors. Perhaps a company likely Arris or Ericsson would be a good home, where synergies are much more easily realized.
So, if the folks at Google are smart – and they certainly think they are – they’ll help the Motorola Video Solutions team along to a better place. But if, as so often happens with smart people, they think they can make it work despite market realities to the contrary, it’s going to be a rough ride for all concerned.
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