For as much as we talk about Apple (NASDAQ:AAPL) and Google (NASDAQ: GOOGL)(NASDAQ: GOOG) in the battle for your living room, you'd think there was no one else competing to serve your eyes with delicious, televised, on-demand candy.
The envelope, please ...
And yet, you'd be wrong. Roku is the most-used streaming media player in the U.S., Parks Associates reports. Of households that have a set-top box, 44% use a Roku most while 26% use Apple TV most. The gap has widened since 2013, when 37% of streaming media player owners used Roku most and 24% used Apple TV most, Parks says.
Bear in mind that Parks' data is only reflective of the estimated 20% of the U.S. households with broadband access. Were this a horse race, we'd be just out of the gate and into the opening furlong. Even so, in the U.S., the trends favor Roku. Last year, "other" box suppliers saw their share of the market shrink about as much as Roku's share expanded:
A global conflict
Yet the news isn't all bad for Apple. Parks estimates the worldwide installed base for Apple TV at 20 million versus 8 million for Roku as of the end of 2013. Tiny numbers when you consider the increasing popularity of American television and cinema is Europe and Asia. Netflix alone serves over 46 million paid subscribers across the globe. As its membership rolls grow, so too should the market for Apple TV, Roku, and alternatives.
If there's a loser here, it might be Chromecast. Roughly 6% of U.S. broadband households have one. Among the owners that Parks surveyed, monthly use of the device for watching Internet video on TV dropped to 73% in the first quarter from 78% in the third quarter of 2013. Perhaps that's why Google touted forthcoming support for Chromecast mirroring at last month's I/O developer conference.
Parks doesn't weigh in on the specific potential for Fire TV. But there's also no doubt that Amazon.com's mere interest in the market is a threat, and could "awaken the sleeping giant that is Apple," research director Barbara Kraus said in a press release announcing the findings.
Back to the Mac maker
All of which tells me, as an investor, that this is going to be an interesting space to watch in the coming years. Parks agrees, estimating that global sales of streaming media players will rise 23% annually from about 20 million last year to over 57 million in 2018.
How much of an opportunity is that for Apple and its peers? Not as big as you might think, especially when you consider that streaming media players tend to run $99 or less. The unknown is iTunes, which accounted for $4.6 billion in fiscal second quarter revenue and ranks as Apple's second-fastest growing business. A larger installed base of Apple TV users should lead to more digital rentals and sales, allowing for accelerated software and services revenue growth while producing higher margins and improved profits. And that's without factoring in the potential impact of iOS games playable via an Apple TV. So even if we aren't talking iPad numbers -- remember, it wasn't long ago that the Mac maker referred to Apple TV as a "hobby" -- this is a real, vibrant, and growing opportunity from which Apple seems well positioned to profit.