Earlier this month, set-top box maker Roku announced that it had sold its 10 millionth streaming player -- an impressive figure to be sure, but one that had long been surpassed by rival Apple (NASDAQ:AAPL), whose own streaming box, the Apple TV, broke through the 20 million barrier more than four months ago.
Apple may have sold many more since then, and other streaming alternatives -- like Google's Chromecast and the Amazon FireTV -- have seen a fair amount of success. (Google has not given firm numbers for the Chromecast, but admitted back in March that it had sold "millions" -- likewise, Amazon has not offered up FireTV unit sales, but said that the device had significantly exceeded its expectations.)
Although these boxes offer some unique features (AirPlay screen mirroring, for example), they primarily serve as gateways for Netflix (NASDAQ:NFLX), and other Internet-based video. Their continued popularity should be viewed as a threat to the larger cable establishment, as they help facilitate cord-cutting.
Netflix: Let us on your cable box -- or else
In recent years, Netflix has worked hard to bring its service to as many Internet-connected set-top boxes as possible. More recently, the Internet streaming giant has set its sights on cable boxes as a way to further expand its potential customer base.
Various reports, however, have indicated that many cable operators are less than enthusiastic about allowing Netflix's service on their equipment. Given that it exists outside the scope of their business models, and is many ways a competitor, offering Netflix to their subscribers could ultimately be cable's undoing.
But in Netflix's April investor letter, it offered a powerful argument as to why it would be in cable's best interest to put Netflix's app onto their equipment:
"From [cable's] point-of-view, they would rather have consumers use Netflix through the [cable] box and remote control than have consumers become accustomed to watching video from a smart TV or Internet TV device remote control."
In other words, Internet-connected set-top box's are cable's anathema -- the more people use them, the more likely it is for them to ditch cable. Indeed, a survey from Experian Marketing Services (via Business Insider) found that households that used Netflix on an Internet-connected TV were far more likely to not have cable than those that used Netflix on a PC or mobile device.
Content creators are coming around
At the same time, it appears that content creators are finally waking up to the reality of the situation. Earlier in September, at an investor conference, Time Warner's CEO Jeff Bewkes and CBS' CEO Leslie Moonves admitted that their premium channels -- HBO and Showtime, respectively -- could eventually be offered as stand-alone, Internet-based services.
Neither offered a set time table for the switch, but both stances are a dramatic departure from years prior. Time Warner's HBO Go has been available for the Roku and Apple TV for more than a year -- Showtimeanytime, CBS' premium alternative, is a relatively recent addition to both devices.
Other options appear imminent. Dish Network, Sony and Verizon are all planning some sort of Internet-based cable alternatives, though the details are scant. Sony's option will likely involve its own PlayStation video game consoles, but such services could give their subscribers an authenticated password, one that they could use to access existing apps on the set-top boxes they may already own.
The end of cable?
Many of the apps that Apple TV and Roku offer require such a password, one that is only granted to cable subscribers. Yet, it's no secret that these passwords can easily be shared among friends and family -- countless guides on cord-cutting advocate exactly that.
Exactly how many cord-cutters are engaging in such practice is a mystery, but the correlation between set-top box sales and cable TV subscriptions is uncanny: Last year, for the first time, the paid-TV industry as a whole lost subscribers -- just over 100,000 in total. It wasn't too significant a number, given that millions of households still pay for cable, but the trend is clearly brewing.
Sam Mattera has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. The Motley Fool owns shares of Amazon.com, Apple, Google (A shares), Google (C shares), and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not 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.