Is Google, Apple or Amazon the Best Play in This Key Market?

Google  (NASDAQ: GOOG  )   (NASDAQ: GOOGL  )  wants to try TV again and will challenge Apple, Inc. (NASDAQ: AAPL  ) and Amazon.com (NASDAQ: AMZN  )  in the competition to bring digital content to your living room.

At its developers conference in the city by the bay the search engine giant just announced a set-top box that will run a specialized operating system, Android TV, that it is developing. The new software will work seamlessly with Google Play. The box, actually branded by several third-party manufacturers, will be controlled by Android-powered smartphones and wearable devices. 

What does this mean for investors of the three companies, which together have a combined trillion dollar market capitalization?

Google TV 3.0
This is Google's third foray into TV and comes after the ill-fated Google TV and the Chromecast plug-in device. The box will provide yet another gateway for ad revenue for Google, which is not resting on its laurels in spite of its dominant position in monetizing both web and mobile search. Since Americans spend a lot of time in the living room in addition to being in front of a PC or on their smartphones, Android TV makes sense. 

The new product may be as far-fetched like some of the other things the company has thrown out there recently such as Google Glass, Project Loon, and its driverless car.

The fate of the strategy, and return for investors, rests in how well its competition performs too. And success probably will be determined by what happens in Cupertino. Google could be fighting for second place but being runner-up won't be a bad thing for investors.

Fire TV
Announced earlier this year, Amazon's Fire TV is a set-top box that joins a line-up which includes the new Fire Phone. 

Fire TV and Fire Phone are designed to keep Amazon humming along on the revenue front with an ecosystem of products. The company has been growing its top line at a very robust rate for a long time. That probably isn't about to change anytime soon but will the new products really move the needle? Based upon the Kindle experience and some early reviews the answer is no.

Amazon hasn't really penetrated the tablet market all that much and shipments and market share is actually declining. Fire TV, like the Amazon tablets, is nothing special, either in its hardware or features, and consumers probably won't go out to buy it to simply order stuff from the company.

Amazon investors will have to be happy with the current trends which include spotty bottom-line performance and a stratospheric valuation. It might be a good idea to hold off on buying shares until earnings growth becomes the rule rather than the exception. 

Apple TV
Apple investors have no such worry. The stock is reasonably priced with a P/E of 15 and the company has a bunch of new products in the pipeline which should stimulate growth.

Apple TV, a small wireless-enabled, cube-shaped device which provides content to the boob tube via the HDMI port, is actually the fastest growing part of Apple's business. Shipments doubled year-over-year in 2013 to about 10 million units and the company generated over $1 billion in revenue from the device. CEO Tim Cook recently stated that TV will become even a more important part of the Apple experience down the road. 

Foolish conclusion
Google has decided it wants to compete again for your entertainment dollar with the release of Android TV, its latest foray into the living room. Success is not assured as the company has to battle it out with two other giants that have a head start. Apple's set-top box is actually the fastest growing part of an already formidable business. Google may have to settle for something other than first place. E-commerce giant Amazon is also part of the fray with Fire TV but it might not make much of a dent in the market. 

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