When Google (GOOG -1.10%) (GOOGL -1.23%) launched the original Chromecast in 2013, its $35 price tag lowered price expectations for streaming devices and its tiny form factor forced companies to release similar products. Google updated the Chromecast with better hardware over the past two years, but it didn't give it a full upgrade until now. At Google's recent Nexus event, the company finally revealed two new puck-shaped Chromecasts -- one for video and another for audio -- which both still cost $35.
Source: Google.
The new Chromecast for TVs will have better connectivity, an upgraded antenna system, and an integrated HDMI cable making it easier to plug in. The updated Chromecast app will also turn a phone into a smart content hub with searchable content. If you search for a TV show or movie, the app will display viewing options and prices across different apps, then cast the content to the TV. Certain Android and iOS games can also be mirrored to the Chromecast, turning the phone into a Wii-like motion controller.
Chromecast Audio is an audio-only solution that streams music from any app that supports casting to audio devices. Any phone, tablet, or laptop connected to the same network can send music to the device. The device might appeal to a much smaller market than the regular Chromecast, but it might take a bite out of smart speaker makers like Sonos.
Google's Chromecast strategy
To understand why Google launched new Chromecasts, we should look back at its previous attempts to make "smarter" TVs. Back in 2010, Google partnered with several OEMs to launch Google TV, which used an interactive overlay to stream content from online video sites.
The first generation of Google TVs and set-top boxes lacked access to the Play Store (then known as Android Market), forcing users to mainly rely on the browser and a handful of built-in apps. Content providers, which wanted to sell their own premium streaming services, blocked Google TV's browsers and caused a major shortage of online content. By the time Google brought Android Market to the platform a year later, consumers had lost interest and OEMs had abandoned the platform.
Realizing that building a new TV ecosystem from scratch was naive, Google decided to cast Android apps or Chrome content to the TV with the Chromecast dongle instead. Content providers were more comfortable with this approach because they still controlled user access via their apps.
Streaming devices for everyone
The Chromecast shouldn't be confused with Android TV, the successor to Google TV that arrived last year. Like Google TV, the Android TV platform relies on OEMs to manufacture smart TVs and set-top boxes. But unlike the content-starved Google TV, Google now offers enough media content and games through its Google Play Store for Android TV to survive on its own.
Android TV. Source: Google.
Since Android TV isn't just a casting device, it's more comparable to beefier set-top boxes like Apple (AAPL -1.22%) TV and Amazon's (AMZN -2.56%) Fire TV. But unlike Apple and Amazon, Google uses a faster and more flexible approach, partnering with multiple OEM partners -- the same strategy that it used to dominate the smartphone market.
Meanwhile, the two new Chromecasts target customers who want to simply stream and mirror content from their mobile devices at the lowest possible price. Unlike Android TV customers, who see a set-top box or smart TV as a central hub, Chromecast customers use their mobile devices as hubs instead. Google likely hopes that this scattergun approach can help it sell the maximum number of streaming devices across multiple price tiers.
Diverging markets
Devices from Apple, Amazon, Google, and Roku accounted for 86% of the U.S. streaming market last year, according to research firm Parks Associates. Roku was the market leader with 34% of the market, followed by Chromecast, Fire TV, and Apple TV, in that order. In terms of overall usage, Roku claimed 37% of the market, followed by 19% for Chromecast, 17% for Apple TV, and 14% for Fire TV.
While these devices are frequently compared to each other, they all target slightly different markets. The Chromecast is mainly used for casting content from mobile devices to TVs. The Fire TV is designed to keep users subscribed to Prime for streaming content and other perks. The new Apple TV establishes a new app store for TVs and tethers users more tightly to the iOS ecosystem. Roku devices are well-suited for customers who don't want to pledge allegiance to any of those ecosystems.
It's all about ecosystem growth
Chromecast sales probably won't account for a meaningful percentage of Google's top line, but the device still represents a powerful ecosystem play which expands Android beyond phones and tablets. That move, which complements the Android Auto initiative in cars, makes Google a true threat to companies like Microsoft, which rely heavily on the dominance of a single platform.
