Google’s hopes of becoming a force in television by releasing software that brings Web video and other online content—including ads—to the small screen appear to be fading fast. In recent months, stores and distributors selling one flagship Google TV device returned more of them than they sold as consumer demand fell.

That embarrassing statistic appeared in a July 28 earnings announcement released by Logitech. The announcement covered the fiscal quarter ending June 30. The company’s Revue set-top box was announced in partnership with Google when the search giant introduced its TV software last October. Sony was also part of the launch, and sells television sets with Google TV built in.

But Google TV devices have gained little traction. They launched to poor reviews citing them as difficult to use, and met opposition from broadcast and cable networks wary of the Web content might undermine their hold on viewers. Competition from less expensive machines from Apple and Roku, as well as from game consoles, has been intense.

Logitech chairman and acting CEO Guerrino De Luca told analysts that Google TV has “not yet fully delivered on its own promises.” His company had already cut the price of the Revue from $299 to $249. Now the price will be slashed to $99, on par with Apple and Roku’s Internet TV devices. Logitech has other challenges, such as distribution problems in Europe that led to flat revenues. However the first Revue price drop and the returns cost Logitech $34 million, and contributed to the departure of De Luca’s predecessor, Gerald Quindlen.

Google TV is not finished, though. Apple TV soared in popularity after a similar price drop last September, and Google says it’s not giving up. “We launched Google TV with a firm belief that bringing the power of the Web into the living room will significantly enhance the television experience,” a spokesman said in a statement. “We believe in this now more than ever.”

A new version of Google TV will soon be released for new and existing devices later this summer. These devices may come with a simpler interface (consumers and reviewers have complained that the current version is too complicated).

Google appears to have long-term plans, too. It recently acquired SageTV, which makes software to turn a personal computer with a TV tuner card into a media center capable of recording, pausing, and streaming shows to devices around the home. Observers said Google bought the company more for the talent of its management team than its product, but it will take more time to apply that expertise to new software.

Google may also have an ace up its sleeve in the form of its mobile app store, the Android Market, a version of which is due to appear on Google TV devices later this year. Software developers are expected to create apps that bring new services to TV, from online social games to apps that turn smart phones and tablets into remote controls. “When Android Market opens up Google TV to more apps, we’ll start to see things come about that we haven’t thought of before,” says Rakesh Agrawal, CEO of SnapStream, which sells technology that enables government agencies and TV production companies to search TV content.

Yet Google’s toughest challenge is to convince TV studios and networks to stop deliberately obstructing its service. Days after Google TV debuted last October, CBS, NBC, and ABC started blocking shows freely available on their websites from being viewed using Google TV devices. Attempts to convince the broadcast and cable networks that Google TV was a complement, not a competitor, were fruitless.

That has left a big hole in what users can view on Google TV devices. Virtually every other competitor offers access to the online TV service Hulu, for example, which is operated by a coalition of broadcasters.

Google TV isn’t yet a lost cause, according to people who closely watch the still-emerging market for so-called Connected TVs and devices. “The consumer home media experience is set for massive disruption,” says Jeremy Toeman, chief product officer for Dijit, a San Francisco startup whose software turns a smart phone into a TV remote control with a program guide and social networking. But unless Google can give consumers a reason to crave Google TV, the company may play only a bit part in that disruption.