Alphabet Inc. is making a big streaming bet with Android TV, and believes it can profit from a new approach to television that takes a cue from its efforts in smartphones.
In some ways, Alphabet’s GOOGL, -0.19% GOOG, +0.06% television push aims to mimic the popular Android mobile operating system, especially in the way it makes money, Android TV director Sascha Prueter told MarketWatch in a Tuesday interview at the Google I/O developers conference. Without selling ads directly inside of the TV software, Alphabet Inc.-owned Google makes services it already offers such as buying apps, renting movies and watching YouTube more enticing — all of which add to the company’s bottom line in different areas.
“With Google Play, we actually have a fairly good ecosystem where Google earns some money on the Play store and Play movies on every Android TV device, which obviously is an advantage for us,” Prueter said. “We also want to make sure Android TV is also a platform that gets you the Google services at the best quality.”
Google first introduced Android TV in 2014, but has struggled to establish its hardware next to its own Chromecast streaming dongle and already successful devices from Roku Inc. ROKU, -0.90% and Amazon.com Inc. AMZN, -0.38% It has, however, signed deals to power a number of smart TVs made by the likes of Sony and Sharp. Despite doubling its user base over the past year, Android TV wasn’t featured prominently among Google’s major I/O announcements such as the Waymo unit’s self-driving efforts.
YouTube is a strong example of Android TV’s opportunity to offer the company’s services at their very best on the big screen, Prueter explained, saying YouTube “user engagement is much higher than on other platforms.” Engagement often correlates to more time on a site, which in YouTube’s case would afford it more chances to serve pricey video ads to users.
Much like the mobile operating system, Google hasn’t yet built ads into the Android TV operating system itself. “No one wants to see a screen plastered with advertising,” Prueter said.
Since Prueter says Android TV revenue will be spread across core Google offerings such as the Play store and YouTube, it will be difficult for investors to figure out exactly how much cash the unit brings in. That’s because Play is part of the “Google Other” segment, which also includes its cloud unit and its hardware sales. YouTube revenue is included with all of Google’s ad sales and not disclosed independently, despite Securities and Exchange Commission pressure.
While Prueter didn’t go into specifics about the company’s partnerships with pay-TV operators and internet service providers, the company has signed 30 deals so far around the world and plans to add 30 more in the “coming months.”
Design is a critical part of the short- and long-term plan for Android TV, and Prueter said that one of Android TV’s crucial capabilities is to integrate set-top cable-box linear TV, alongside DVR recording hardware and the likes of Netflix Inc. NFLX, -0.95%
“That’s the vision we have,” Prueter said. “You should be able to bring all these together and find content no matter what, you shouldn’t have to care who delivers it, where it comes from.”
Key to the company’s design vision for Android TV is a concept that Prueter talks about called “Screen Zero.” It refers to the central screen on a TV set — like the home screen on a mobile phone — that users can access or preview the content or shows they’re interested in consuming, which Prueter and other executives showed off Tuesday at the conference.
“For users I think it’s great because I don’t want to switch between three different devices to get content on my one home screen where I spend most of the time,” Prueter said. “We want to put content first.”
Part of the effort is a JBL smart sound bar announcement — which includes Google Assistant and its Android TV — from earlier this week. That hardware, among other gadgets, coupled with the TV software aim to position the company’s products as central to people’s living rooms.
“We’re focused on the big screen for that, and we’re not trying to turn Android TVs into something for thermostats, we have different optimizations for that in the Android ecosystem,” Prueter said. “We want to be a living room platform.”
Alphabet class A stock closed up 2.8% to $1,088.95 Wednesday. The class A shares have gained 10% in the past year, as the benchmark S&P 500 index SPX, +0.17% rose 11%.