When Netflix first debuted its streaming service in 2007, the idea was exciting but odd: Who would want to watch a movie on a computer? That soon turned out to be the wrong question to ask. As Roku (NASDAQ:ROKU) soon proved, the real question was which companies would step up and create ways for Netflix fans to stream content to their television screens.

Today, most homes have some means of streaming Netflix on a TV. Smart TVs are the new normal, and streaming boxes like the one Roku debuted way back in 2008 are everywhere. As of last year, at least one device capable of streaming video to a TV could be found in 58.7% of U.S. households. And most of those streaming devices run one of just two major streaming platforms: Roku and Amazon's (NASDAQ:AMZN) Fire TV.

Hands holding brown paper packages tied with ribbons.

Image source: Getty Images.

That means that Roku and Fire TV are archenemies. And this holiday season, a showdown is brewing.

Where Roku and Fire TV stand today

When it comes to market share, no other streaming platforms are close to Roku and Fire TV. Roku has the lead right now: 37% of streamers opt for Roku devices, compared to 28% for Fire TV. Other streaming devices and platforms are comparatively weak players: Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG) Chromecast, for instance, has just half as large a market share as Fire TV and has been losing ground, per Parks Associates' 2018 findings.

Streaming Device Market Share
Roku 37%
Fire TV 28%
Apple TV 15%
Chromecast 14%


It's not hard to see how each company got here. Roku has been in this game from the start, having debuted its first streaming box and essentially invented this space in 2008, not long after Netflix first began to offer online streaming. Amazon had the corporate muscle to make a splash when it entered the market with the first Fire TV device in 2014. The fact that Amazon could promote its own hardware on its massively popular e-commerce website surely did not hurt. (Amazon has also used its position as an e-commerce giant to hurt its competitors -- for instance, Amazon kept Chromecast devices out of its online store for a time last year.)

Roku enjoys a huge user base and rave reviews from tech writers. But Amazon's Fire TV platform has fans, too, and Amazon has a structural advantage that looms large as the holiday shopping season arrives. As holiday shoppers flock to Amazon.com, look for Amazon to make a big push to overtake Roku in the streaming device market.

Amazon's goal: Overtake Roku this holiday season

Roku's early arrival has made it the platform to beat. But Amazon, unlike other competitors, has shown an ability to grow its market share despite a late arrival. Amazon moved from a 16% market share in 2016 to a 24% share in 2017 before reaching this year's 28% share. By contrast, Apple's (NASDAQ:AAPL) Apple TV lost ground in 2017 and held steady in 2018, and Chromecast lost ground from 2017 to 2018.

Amazon's growth has a lot to do with its status as an e-commerce giant. You can buy Roku, (since the end of a brief spat in 2017) Chromecast, or Apple TV devices on Amazon, but a glance at Amazon's top sellers in the streaming media player category will surprise exactly no one. Fire TV devices hold the top two spots.

Shipping boxes spill out of a mini shopping cart resting on a laptop keyboard.

Image source: Getty Images.

Still, Roku fares surprisingly well on Amazon's streaming media player best-seller list. Amazon will hope that its "Amazon's Choice" label on search results, intrasite banner ads, and special sales will help its streaming platform dominate on its shopping platform this holiday season.

What to watch for this holiday season

Of course, Amazon isn't the only one hoping for big holiday sales. Roku has not been standing pat, and its recent release of a very affordable 4K-capable streaming device shows that it still has a few tricks up its sleeve. (It's no mistake that the more affordable streaming devices dominate Amazon's streaming media player best-seller list, nor is it a mistake that Roku is attacking Amazon at a price point where it does very well.) That device and its low price point are an assault on Fire TV's popular low-priced models.

But Amazon may yet answer with new hardware, and the e-commerce giant has already countered with price discounts.

Roku will have to maintain its advantages and make the most of sales at brick-and-mortar stores and competing e-retailers like Best Buy and Walmart. Roku has a special relationship with the latter that includes device exclusives.

Online shopping is the new normal for holiday gift buying, and millennials -- a key demographic for cord-cutting products and services -- are especially likely to shop online. That helps Amazon. Will it be enough to make up a still-significant gap in market share?

Who wins in a holiday shopping showdown?

Roku's platform is a proven winner and has plenty of dedicated fans, but it's not hard to imagine Amazon closing the gap or even finally overtaking Roku this holiday season. The structural advantages in Fire TV's corner are massive, and it shouldn't take much more than common sense for Amazon to parlay its standing as a holiday shopping destination into gains in the streaming platform market.

Amazon gained 4% in market share last year. It seems poised to grow at least that much this year, especially given the fading impact of Chromecast, which occupies a lower price point that Amazon has long done well in. Reaching Roku's 37% might be a tall order, but it seems like a given that Amazon will find its way into at least a third of streaming households by the time this year's holiday gifts are unwrapped.

A disappearing lead would be bad news for Roku, of course. Though dedicated fans and a still-large market share ensure that the company won't go anywhere fast, losing the No. 1 spot would be a big blow to a brand that focuses entirely on its streaming platform and devices. Unfortunately for Roku, Amazon's much broader approach might be the very thing that makes the company hard to beat this holiday season.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.