Well, this is embarrassing. Logitech's Revue, Google's first hardware entry into the television set-top box scene, has shown more returns in the past few months than sales. Even though its recent 65% price cut is a bit easier to swallow, it seems like a last ditch effort that has us all still feeling quite skeptical.
The Content Chokehold
Okay, let's get down to the nitty gritty. Why does TV still rock more than any of these "Internet" set-top boxes have to offer? Content. After all the yelling and screaming about who's interface is prettier, it all boils down to content and getting that content to the customer with as little effort on their end as possible.
To add on top of that, Google TV was instantly plagued with blockades by the major broadcast networks, forcing them to do many workarounds (much like Boxee when they tried force Hulu on their set-top box via a built-in browser hack), and ultimately causing the overall user experience of Google TV owners to be one of the most subpar amongst the set-top box universe.
The Pricing Game
Another big piece which contributed to the failure was the price. Not only were expectations of customers not met (for $299, it better be darn good), but the stressed economy has made early adoption rates drop significantly in addition to creating a much more critical consumer.
An Overly Business-Focused Approach
One hard bat to swing is adapting to the Internet's undeniable feeling of having everything delivered for "free." Forcing any kind of half-thought-out business model will instantly be rejected by the majority of Internet users who have become accustomed to only paying for things they perceive to valuable; in this day in age, it's heavily weighted towards convenience (hence the recent successes of Netflix and gaming distribution platforms such as Valve's Steam network).
Internet TV is not Just Any Other TV
We're a firm believer that the next generation of "smart" TVs will no longer behave as your standard tube box from the past 30 years. It'll be significantly different, allowing for your curated content to work around your busy work schedule, empowering you to use any of your Internet-connected devices to watch shows from where you left off, and embedding itself into your lifestyle rather than constantly calling for attention (or firmware updates.. eck).
Tomorrow's TV should be exciting users, treating them like real people and not "consuming machines." It seems many companies and content holders seem to have forgotten the most important reason and what made TV so awesome to begin with - enjoying great content with people you love.