A whopping 40% of U.S. households now own some type of streaming media player, according to estimates released earlier this year by Park Associates, up from a mere 6% in 2010. The market has been quickly shifting toward low-cost streaming sticks using the dongle form factor, with Roku (NASDAQ:ROKU) leading the way with 37% market share in the first quarter, followed by Amazon.com (NASDAQ:AMZN), thanks in large part to products like Roku Express and Amazon's Fire TV Stick.
Seeing the success of its rivals, Apple (NASDAQ:AAPL) might get into the streaming stick game.
Moving on down
The Information (subscription required) reported this week that the Mac maker is considering moving downmarket with an affordable streaming stick in an effort to grow its installed base ahead of the launch of its forthcoming video-streaming service. Previous reports suggested that the company plans on making all of that original content it's been purchasing available for free initially to all Apple device owners. The company would then charge subscription fees later on, after getting viewers hopefully hooked on any number of its original series.
It's not clear what price point Apple would be targeting, but the current lineup of Apple TV set-top boxes starts at around $150 and goes up to $200 for a 4K model with more storage. Roku Express, Fire TV Stick, and Alphabet's Google Chromecast all start between $25 and $30. Given Apple's premium pricing model, it's unlikely the company would go that low, but it could conceivably offer a product in the $50 to $100 range that is more accessible to mainstream consumers.
The streaming media player market is becoming increasingly commoditized, as many of the most popular over-the-top (OTT) streaming services are universally available on all platforms, most notably Netflix. If Apple is hoping that its streaming service can differentiate its hardware and justify premium pricing, its original content will need to be extremely compelling. Considering the caliber of the content it is buying, including from studios like A24, that's entirely possible.
Apple should definitely do it
The market has changed quite a bit since Steve Jobs lamented in 2010 that "nobody is willing to buy a set-top box." Back then, the TV industry essentially utilized a subsidized model where cable providers offered a set-top box as part of their service. The market for streaming media players has been booming ever since, creating robust competition and ample consumer choice.
Currently priced well above its competitors, Apple is arguably losing its competitive edge. The company should absolutely move downmarket with an affordable streaming stick.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Evan Niu, CFA owns shares of Amazon, Apple, and NFLX. The Motley Fool owns shares of and recommends GOOG, GOOGL, Amazon, Apple, and NFLX. The Motley Fool has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool has a disclosure policy.