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Roku Will Always Offer the Ultimate Set-Top Box

By Sam Mattera – Mar 16, 2014 at 8:15PM

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Even with competition from Amazon, Apple, and Google intensifying, Roku has a key advantage over its rivals.

Roku isn't a public company, but according to Bloomberg, investors might have a chance to buy shares later this year. If so, Roku could emerge as the best way to take advantage of the growing trend toward Web-based video.

Although Roku competes with a number of massive companies, including Apple (AAPL 0.83%), Google (GOOGL -0.15%), and soon (AMZN -0.59%), it's becoming increasingly clear that Roku will always have an advantage over its larger rivals.

Too many conflicts of interest
Amazon is widely expected to release a set-top box later this month. Offering another way to stream Internet video, and priced aggressively, Amazon's set-top box will more than likely compete with Roku's family of streaming devices, and could be expected to weigh on Roku's sales.

Or maybe not. According to Gigaom, Amazon's set-top box will be hamstrung by the lack of a major app. While it will allow owners to access both Netflix and Hulu Plus, in addition to Amazon's own Prime Instant Video, Google's YouTube will be inaccessible. Given that Amazon's set-top box will likely be powered by FireOS, Amazon's forked version of Google's Android, a YouTube app is highly unlikely.

Roku's other competitors face similar limitations. Apple TV can access YouTube, for example, but it can't directly access Amazon Instant Video -- it requires the use of an iPhone or iPad and Apple's AirPlay technology. Vudu, a competitor to Apple's iTunes, isn't accessible on the Apple TV even with AirPlay.

Google's Chromecast is similarly limited. Earlier this year, Google opened up the Chromecast to third-party developers, allowing them to add Chromecast compatibility to their existing Android apps. This meant that, despite competing directly with Google Play, owners of the Chromecast will soon be able to access Vudu.

But they won't be able to access Amazon Instant Video -- Amazon hasn't released a video app for standard Android devices, and it probably won't anytime soon. Doing so would take away one of the Kindle Fire's key selling points, weighing on Amazon's tablet business.

Roku has no reason to be biased
In contrast, owners of Roku's streaming devices don't face any limitations. Not only can a Roku owner access Netflix and Google's YouTube, but they also get Amazon Instant Video.

Unfortunately, Apple's iTunes and Google Play aren't available, but owners of Roku's devices can go to several different competitors, including Vudu, Target Ticket, Flixster and the aforementioned Amazon Instant Video -- Roku owners have the ability to shop around.

A new level of hardware
If Roku does get outclassed, it will be because its rivals offer far more impressive hardware. Amazon's set-top box could double as a video game console, while both Apple and Google are rumored to be working on more advanced TV products -- the next Apple TV could add in voice and gesture controls, while Google is said to be working on a Nexus video game console.

But adding that extra functionality could come at cost. The Xbox One and PlayStation 4 offer streaming set-top box functionality (in addition to playing video games), but at $499 and $399 respectively, they're several times more expensive than the $99 Roku 3.

By not competing in the content business, Roku can offer more services than its rivals -- even with competition from Amazon, Apple and Google intensifying, the fact that it doesn't have to play favorites is a compelling advantage.

Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends and owns shares of, Apple, Google, and Netflix. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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