Internet products ready to challenge cable TV

It's not just about dogs on skateboards anymore.

Internet television is fast coming into its own, as high profile players have announced a series of products and initiatives that promise to fundamentally alter the way consumers digest video content.

Google Inc. is rolling out services with partners like Sony Corp. this fall that will blend streams from the Internet and broadcast programming on television screens. Hulu, the popular online video site, last week unveiled plans for a paid service that will deliver broadcast shows over the Internet to computers, TVs, the iPhone and iPad, as well as several gaming consoles.

Meanwhile, Sonic Solutions of Novato struck a deal with Sears Holdings Corp. to provide its retail customers online rentals and downloads of movies and TV shows over an assortment of Internet-connected devices.

The approaches vary, but they all present alternatives to what most of us have come to think as normal: Paying $50-plus a month to pipe in a handful of channels we want - along with hundreds we don't - in order to watch the few programs we're interested in, largely at the time we're told.

These new services allow consumers to pick from a broader array of content options, enjoy online programs through the so-called lean back experience of full-size TV screens or across various mobile devices, choose when they'd like to view without having to remember to set a recording and, particularly in the case of Google TV, take advantage of new interactive features.

Most of the companies enabling what's known as "over the top" services stress they're looking to augment rather than displace the offerings of cable or satellite companies. But analysts think the additional power offered to consumers will leave the legacy companies with a stark choice: progress or perish.

"The future of Internet-enhanced TV starts now," said James McQuivey, media technology analyst at Forrester Research. "It's really forcing cable ... to be more focused on consumer control and access across multiple devices."

More cutting the cord

There's already a growing phenomenon of what's known as cord cutters and shavers, who cancel or scale back television subscriptions as they consume more online.

Some 800,000 U.S. households have already snipped that cable, as they come to rely exclusively on online services, according to an April report by the Convergence Consulting Group. The Toronto firm predicts that could reach 1.6 million by the end of 2011.

The Yankee Group estimates that as many as 1 in 8 consumers will unplug or downgrade paid TV service by April, as they take advantage of over the top options.

But cable and satellite companies aren't sitting idly by. Time Warner Inc. and Comcast Corp. are pursuing "TV Everywhere" strategies that deliver their vast content to already paying customers over the devices of their choosing. They're also supplementing offerings with on demand services and digital video recorders, which share some advantages of online TV.

The networks are also forging ahead, as channels like ABC and NBC deliver more content directly on their Web sites. Today, however, most of these approaches leave the companies with less revenue, because they pack in fewer ads.

Ultimately, the companies must deliver more targeted ads, which are more lucrative, said Tim Bajarin, president of Creative Strategies. Internet TV could make this possible in ways that Nielsen ratings never could.

Bay Area firms' role

Other Bay Area companies are also busy in this field.

Netflix Inc. of Los Gatos was a pioneer in delivering movies online, allowing consumers to watch them over TV through partnerships with various gaming console, Blu-ray player, Internet TV and digital video box companies.

The latter category includes Roku Inc. of Marin, which sells hardware starting at $79.99 that also feeds online content from Amazon, MLB.tv, UFC and other sources to televisions. Apple Inc. introduced the Apple TV set-top box in 2007, which allows customers to enjoy movies and music downloaded through iTunes on their living room screen.

To date, these initiatives haven't exactly upended the industry. But analysts say that Internet TV momentum is clearly building, driven by the increasing adoption and speed of broadband as well as the widening availability of these services.

Moreover, some believe that Google TV could represent a watershed moment.

"It's the first one I would say that represents a brand-new model," Bajarin said.

Notably, it's not restricted to a particular set of services like many of the Internet TV attempts to date, instead incorporating the Internet at large. In addition, it's based on an open platform, Google's Android operating system.

The Mountain View company hopes this will help create an industry standard that propels adoption and innovation, said Rishi Chandra, product manager for Google TV.

Out of the box, the Google-powered Internet TVs and set-top devices will allow users to tap into the company's highly developed search capability to find video, music and other content not just among their cable programming but across the Internet.

Meanwhile, the picture-in-picture capabilities could enable them to, say, pull up sports statistics as they watch the Super Bowl, chat live about World Cup matches with viewers on the other side of the globe, or click to buy that ironic trucker hat Judah Friedlander is wearing on "30 Rock."

Google TV is crucial

The open source platform could also enable developers to invent tools and toys that can't be predicted today, much as Apple's App Store did for smart phones.

Google is providing the platform free, but anticipates making money from advertising within Google TV. It won't take a cut from the ads in traditional programming, but will employ information gleaned from the ways consumers use the service to improve ad targeting on the interactive side.

As with all behavioral advertising, this is bound to raise the hackles of privacy advocates. But, as with most Internet services to date, consumers are likely to decide the trade-offs are worthwhile, McQuivey said.

"Ask 400 million people on Facebook whether the concerns outweigh the benefits," he said.

E-mail James Temple at jtemple@sfchronicle.com.

This article appeared on page D - 1 of the San Francisco Chronicle