While the battle between Roku (NASDAQ:ROKU) and Amazon (NASDAQ:AMZN) for control over the connected-TV market has expanded overseas, there's still a lot of room to grow in the U.S. and Canada. 35.8% of Americans and Canadians don't own a non-mobile streaming device, according to the fourth quarter video trends report from TiVo.
The survey also found smart TVs are the most popular streaming devices, followed by Roku players and Amazon Fire TV devices. Notably, all three are increasing in popularity while other streaming platforms like video game consoles are seeing declining usage.
Meanwhile, more consumers are replacing their pay-TV providers' set-top-box with a streaming device as consumers cut the cord or try to trim their cable bills by cutting out additional fees. That trend may open the door for newer competitors in the space like Comcast (NASDAQ:CMCSA) to take the late majority of the market.
Roku is better positioned than Amazon in North America
As mentioned, smart TVs are the most popular way to stream video on a television set in North America. That plays directly into Roku's strengths. One out of every three smart TV sales in the U.S. last year was a Roku TV.
Roku has the OEM and retail partnerships necessary to compete with Amazon in the smart TV space. Amazon even went so far as to partner with competing retailer Best Buy in an effort to expand its presence in the market. Since establishing that partnership in 2018, Roku has seen its share of smart TV sales improve.
As more and more consumers upgrade their television sets and adopt streaming, Roku is well positioned to win that late majority of adopters.
Owning a plurality of smart TV sales also helps Roku sell more devices. It's unlikely consumers will go out and replace their TV sets because they don't like the smart TV operating system. But they might want to buy a $30 streaming stick for their secondary TV, and they might want it to have the same user interface and apps as their main television.
As such, Roku's position in smart TVs leads to greater adoption of streaming players. That's seen in the 9.8 year-over-year percentage point increase in respondents to TiVo's survey who say they use a Roku device. That compares to a 3.1 point increase for Fire TV.
That trend might not hold true outside of North America, where Amazon has been aggressive with its smart TV program. Roku is making a greater effort to catch up, launching new smart TVs in Europe last fall and launching in Brazil earlier this year.
Is Comcast's Flex a threat?
Last year, Comcast made a move to offer its Flex streaming device to its broadband-only subscribers at no additional cost. The device has similar functionality to a Roku or Fire TV set-top-box, but it's still limited in the number of content partners on the platform.
With more than one-third of North Americans still not using a television streaming device, Flex could be an on-ramp into streaming directly to a television set for many. As consumers call to cancel their video subscription with Comcast, the cable company can offer them a Flex device if they keep their broadband subscription.
But the irony of the name Flex shouldn't be lost on consumers. Non-Comcast customers don't have access to Flex. If customers want to switch broadband providers, they'll lose their Flex devices. Additionally, customers must subscribe to services like HBO Now or Showtime Online through Comcast in order to watch them on Flex, first canceling any existing subscriptions to those services. The product is anything but flexible.
While Flex might bring more consumers to stream video on their TVs, it's likely to frustrate them and lead them to better, more flexible solutions like Roku and Amazon.
While Flex will appeal to some latecomers to streaming, it's unlikely to cut into the growth of Roku and Amazon due to its limitations. Roku's dominance in smart TVs should lead to sustainable long-term growth in active accounts and engagement as consumers look to add streaming capabilities to their television sets and reduce their reliance on equipment from their pay-TV providers.