The Multi-Billion-Dollar War for Streaming Video to TVs is Heating Up

The growing number of people streaming video content to their televisions should increase the intensity of the battle of the digital streaming devices as companies attempt to control people's living rooms.

May 1, 2014 at 8:33AM

Control the television and you will control a large portion of the streaming video market.

While people watching streaming video had been evenly split between television and computers in 2012 and 2013 (with people watching on handheld devices a distant third), TV has become the overwhelming choice. And the overall number of people watching streaming content at all has increased, as the chart below shows.


Technology has made it possible. 

Nearly two-thirds (62%) of TV content viewers now either own a Smart TV or can stream content to their TV through another device, Horowitz Associates reported in its annual State of Cable & Digital Media study. One-third (31%) of respondents said they spend at least some TV viewing time streaming broadband content to the TV set, and TV content viewers said they spend two in 10 viewing hours streaming content, compared to 13% in 2013. 

"The fragmentation of viewing in the age of digital media is not a new conversation. But OTT boxes, gaming consoles, Blu-ray players, and now, devices like Google Chromecast are taking the conversation to the next level," said Adriana Waterston, Horowitz senior vice president of marketing and business development.

This increasing willingness and ability for people to stream to their television sets is one of the many challenges facing traditional broadcast and cable networks and dramatically raises the stakes in the battle to control the living room entertainment experience.

Who are the contenders?

In addition to Smart TV -- that is televisions with the capacity to access streaming digital content apps -- streaming content can be accessed over a number of devices, including Apple (NASDAQ:AAPL) TV, Microsoft's (NASDAQ:MSFT) Xbox, Sony's PlayStation, Amazon's (NASDAQ:AMZN) new Fire TV, Google's (NASDAQ:GOOG) Chromecast, and Roku's players, among others.

CEO Tim Cook admitted to investors earlier this year that Apple's set-top box was now a billion-dollar business, and the previous versions of Microsoft's and Sony's games consoles -- the Xbox 360 and PlayStation 4 -- have sold around 80 million units each (though many are likely not still in service). Even Roku, the little guy in this fight, announced it had sold 8 million players as of February 2013, re/code reported.  

Not every person streaming digital content is using one of these devices. Some use Smart TVs, some get access to apps through Blu-ray players, and others find ways to stream directly from a computer. But offering a set-top "box" (which includes consoles and sticks) to stream content is clearly a growth business in which the ultimate winner has yet to be decided.

What are they offering?

The most challenging thing in predicting the winners is that the main contenders are offering vastly different devices.

Sony and Microsoft are offering full gaming consoles that also serve as entertainment centers offering access to apps, movies, paid downloads, and other content. Sony's PlayStation 4 costs $399 while Microsoft's Xbox One goes for $499.

Apple TV, which offers a robust selection of content choices, easy access to iTunes and other Apple content, and an interface familiar to Apple fans, costs $99.

Amazon's Fire offers gaming plus easy access to the online retailers' Prime Instant Video content (for Prime subscribers), as well as simple integration with the Amazon shopping experience for $79 (for now) with a gaming controller being offered for $39.99.

Google's Chromecast offers a stripped-down but functional device for $35. And Roku has products ranging from $49.99 for its stick to $99 for its top-of-the-line player.

All of these products have their pluses -- which one you buy depends on what other technology you own and what services beyond streaming content you are looking for. Buying an Xbox One or a PS4 mostly to stream Netflix would be silly, but if you want a gaming experience as well then the Apple, Google, and Roku devices won't deliver everything you want. The Amazon product is a nice hybrid offering casual gaming as well as a robust digital streaming player with lots of choices. 

Why these companies want access to your living room

The market for selling streaming video through rentals and app subscriptions is growing and will get even bigger as more pay services enter the market. In general the maker of the set-top box takes a share of revenue when either a video (like a movie rental) is ordered or a subscription to an app or service is initiated. If you are already a subscriber to a service like Netflix, the set-top box company does not share in the revenue even if it delivers the content.

According to numbers released by the consortium of Hollywood studios and electronics makers, The Digital Entertainment Group, in January digital sales of movies and TV shows rose 47% to $1.2 billion, while subscription streaming spending rose 32% to $3.2 billion. The overall rental market, however, was $18.2 billion in 2013 and those dollars are likely to become mostly digital going forward.

Whatever audience the streaming box providers capture offers those companies a chance to not only win a portion of the business detailed above, but a chance to sell directly to users. Roku mostly passes on other people's services, but Apple, Amazon, Microsoft, Sony, and Google all have dedicated stores that offer huge revenue opportunities. Whether it's a video from iTunes or games from Sony, Microsoft, or Amazon, being in the living room allows companies to sell products without a middleman. 

Now that people are becoming more comfortable streaming directly to their TVs, the opportunity to sell movies, games, and other content should continue to grow exponentially. Once a person has installed a digital streaming box it effectively becomes a little store (complete with dinging cash register) that sends a steady stream of revenue back to its maker.

Your cable company is scared, but you can get rich
With all the new streaming options and devices, you know cable's going away. But do you know how to profit? There's $2.2 trillion out there to be had. Currently, cable grabs a big piece of it. That won't last. And when cable falters, three companies are poised to benefit. Click here for their names. Hint: They're not Netflix, Google, and Apple. 


Daniel Kline is long Microsoft. He is currently using Fire TV in his living room, but owns a Roku player, a Chromecast, and an Xbox 360. The Motley Fool recommends, Apple, and Google (C shares). The Motley Fool owns shares of, Apple, Google (C shares), and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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