Google is developing a home-entertainment system, according to a report by the Wall Street Journal. The device will "stream music wirelessly throughout the home" and will be branded with the Google name.
While it may be premature to jump to conclusions about Google's intentions for home entertainment systems, I am extremely skeptical about the likelihood of success for this venture. It is a brand extension that seems to be too far from Google's core set of competencies. The consumer electronics business is notoriously challenging. Heck, even Sony is struggling.
The effort required to gain acceptance into consumer electronics distribution channels with a limited product line is expensive and difficult. The amount of management time required to oversee the launch could be a huge distraction from enhancing the core base of Google's highly profitable services.
For reference, Road Tickle, has compiled a list of notable failed brand extensions.
If my prediction turns out to be wrong and Google can make a success out of a brand extention into the home entertainment business, it is unlikely that it will be due to hardware sales. The potential for profits is from music and app purchases. A fully integrated home-entertainment system that can be managed from a set top, desktop, tablet or smartphone and pushed to multiple devices might ramp up Google's music sales. However, it seems to me that Google would be much smarter to focus on the delivery of content and programming aspects of this opportunity. They should leave the challenging hardware business to others with established distribution models.