* Google launches Web TV foray
* Sony TVs to be ready in U.S. by Christmas
* Key is don't dumb down the Web, Google says
* YouTube demonstrates new service for Google TV users
* Sony shares up 0.4 pct, against slide in broader market (Adds details on YouTube service)
By Alexei Oreskovic
SAN FRANCISCO, May 20 Web search king Google Inc (GOOG.O) on Thursday showed off a risky attempt to marry the Web to television and reach the $70 billion TV advertising market, chasing a dream that has eluded even archrival Apple Inc.
Developers at a conference applauded "Google TV," and a slew of tech industry titans, including microchip maker Intel Corp (INTC.O) and TV maker Sony Corp (6758.T), sent their chief executives to announce that they had joined the project and that TV sets would be ready in time for Christmas buying.
The key to Google TV is an on-screen search box, just like on Google's Web site. The TV search box accesses Google's search engine to look through live programs, DVR recordings and the Web, delivering a relatively compact list of results that can be accessed with a push of the button.
Internet television has been a minefield for the world's most creative and deep-pocketed companies, and in a sign of the challenge, embarrassed Google engineers struggled initially to get their TV running, asking the audience to turn off their cellphones, which were interfering with TV remote controls.
Web surfers have never left their desktops for the living room, and television watchers have kept their remotes pointed toward familiar territory despite attempts by Microsoft Corp (MSFT.O) and by Apple (AAPL.O), which was the focus of frequent verbal jabs and jokes.
Sony will build devices, marketed as Sony Internet TVs, to launch in the United States in the fall -- in time for the 2010 holiday season -- with Intel providing its small Atom processors to run machines. Sony did not release pricing and said it had not decided on plans for the TVs in other markets.
Logitech International LOGN.VX also will create a Google TV appliance that can work with current high-definition TVs.
Television represents an attractive market in which to expand Google's Internet advertising business, which generated the bulk of its $23.7 billion in 2009 revenue.
Walkman creator Sony has seen its dominance in electronics eroded and has been looking for new technology, including 3D, to goose TV sales.
"Video should be consumed on the biggest, best and brightest screen in the house. And that's a TV. It's not a PC or a phone or anything else in between," said Google project senior product manager Rishi Chandra.
Best Buy Co Inc (BBY.N) will sell devices and DISH Network Corp (DISH.O) will integrate its satellite television service into Google TV. Chief executives from those companies -- as well as Google, Sony, Intel, Logitech and Adobe Systems Inc (ADBE.O) -- all appeared on stage at Google's developers' conference for the announcement.
The move fits with Sony's strategy to focus more on its content business and to forge alliances rather than try to develop and produce everything on its own, said Mizuho Securities analyst Ryosuke Katsura.
"Sony is trying to be asset-light and increase earnings from content distributed online," he said. "For device development, it is seeking alliances rather than going it alone like it has been doing up until now, and this deal is a part of that move."
Shares in Sony, the world's No. 2 LCD TV maker behind Samsung Electronics Co (005930.KS), rose 0.4 percent in afternoon trade in Tokyo, outperforming a 2.7 percent fall in the benchmark Nikkei average .N225.
Google executives said previous efforts had failed because they dumbed down the Web for television, were closed to participation by others, and made people choose between using the Web or television.
"It's much harder to marry a 50-year-old technology and a brand new technology than those of us in the brand new technology industry thought," Google Chief Executive Eric Schmidt acknowledged to the audience of developers.
TV presents a potential new audience for the trove of online videos that Google offers through its website YouTube, which demonstrated on Thursday a new service called Lean Back designed to create automated video playlists for Google TV users.
A YouTube spokesman said the content currently available on YouTube would also be available to consumers surfing the web with the browser on Google TV, but that it was still determining what exactly would be on the Lean Back service.
It was not immediately clear whether media companies might object to having the online video content that they have offered for PCs available on Google TV, fearing such a move could harm their traditional TV business.
A spokesman for video website Hulu, owned by Walt Disney Co's (DIS.N) ABC, News Corp's (NWSA.O) Fox and General Electric Co's (GE.N) NBC, declined comment on Google TV.
Hulu and its owners have already blocked its content from other Web TV devices like a set-top box from privately held Boxee and Sony's PlayStation 3 game console.
Chief among the questions hanging over the newfangled televisions is the price.
"If this thing costs 900 bucks forget it. This is going to have to be right about where a phone is, 250 bucks," said Gartner analyst Ken Dulaney in reference to the set top box that Logitech said will bring Google TV to existing high-definition television sets.
Hudson Square Research analyst Daniel Ernst said consumers could be disappointed if TVs appeared before developers had made many applications for the system.
"The basic concept that they are doing is great, but it (parts of it) looked a little half baked to me. Someone like Apple is going to do this, and they are going to do it well," he said.
Apple in 2007 debuted Apple TV, which plays computer-based video on television sets. Its popularity has paled in comparison with devices like the iPhone and iPad.
Google's increasingly tense relationship with Apple was clear throughout the conference. Engineers showed off new versions of the Android mobile phone platform, which competes with Apple's iPhone.
Android also will run Google TV, turning Android phones into controls that can be used in the same room as the television or remotely across the Web.
Apple has criticized Adobe's Flash video product, a popular product which has been left out of Apple's iPad tablet but was embraced by Google.
"It turns out that on the Internet -- people use Flash!," one Google executive said in a typical joke at Apple's expense. (Additional reporting by Sue Zeidler in LOS ANGELES and Sachi Izumi in TOKYO; Writing by Edwin Chan and Peter Henderson; Editing by Gerald E. McCormick, Richard Chang and Steve Orlofsky)