Cupertino company to face even more heat after Fire TV throws its hat in the ring in 2014

Just months after Google took a commanding 2-to-1 lead in tablet unit sales, new data has emerged indicating that Apple's streaming video device, the Apple TV, was passed by not one, but two of its rivals last year.
I. Google, Roku Outsell Apple Nearly 2-to-1, Each
Parks Associates, a market research firm specializing in residential service analysis, has compiled sales numbers from 2013, examining the top sellers in the streaming video device market (i.e. streaming video USB sticks, set-top boxes).  According to its estimates the sales breakdown was:
Apple can still brag that it has the global lead over its rivals.  Globally, it had sold 20 million Apple TV boxes, between when the first generation device launched in Jan. 2007 and the end of 2013.  Roku -- whose first set-top box launched in May 2008 -- had sold only 8 million units through the end of 2013.

Apple TV third generation
A third generation Apple TV set-top box

One key reason for this lead, according to Parks Assoc., is Apple’s strong international sales presence.  Apple TV is available in an incredible 121 countries, although only five (the U.S., UK, Australia, Canada, and France) have the ability to buy TV content.
Roku 3
Roku has sold 8 million units since 2008, despite only being available in four countries.

Roku, by contrast, is only available in four countries -- the U.S., UK, Ireland, and Canada.  According to Gigaom, as of June 2014 Chromecast was available in 19 countries, with the most recent addition being Brazil.
II. The "Expensive Hobby" Revisited
But despite its reach, Apple TV has struggled.
Once termed an expensive "hobby" by late Apple CEO Steven P. Jobs, the device is nonetheless the biggest miss in Apple's popular product portfolio.  In March Apple sold its 500 millionth iPhone.  In June 2014 at its annual Worldwide Developer Convention (WWDC) Apple announced it had sold 200 million iPads, since it launched in April 2010.  In other words, the iPhone, which has been on the market for a similar amount of time as the Apple TV, has outsold it 25-to-1.  The iPad in half the time on the market has outsold it roughly 10-to-1.
Key to Apple's ongoing struggles with the device are three fundamental flaws -- features, hardware updates, and price.

Apple TV

In terms of features, Apple offers modest gaming and internet radio offerings on the device.  The former is provided via AirPlay, but is limited in that Apple has yet to offer a set of APIs to produce third-party native games for the Apple TV; currently gameplay is exclusively via streaming video output from your iPhone or iPad with games on it.
Likewise, internet radio is only partially supported, requiring a complex PC-side syncing process.  In its other products simplicity has been a strong selling point; with Apple TV much of the "features" are only available via complex and at times bizarre workarounds.
III. Price and Lack of Updates Have Hurt Apple
By comparison, both Roku and Chromecast appear to have Apple TV beat feature-wise, with easy-to-use straightforward features, with standalone gaming and internet radio options.
That brings us to the second problem -- updates.  While Google deserves a bit of flak for lack of hardware updates (*cough* no 802.11ac *cough*), it has been pretty aggressive with firmware updates.  At Google I/O in June it demoed an upcoming firmware update that will allow streaming video output from many smartphones and tablets (including for games).  This should bring Google close to parity with AirPlay.

Chromecast hero

Apple, meanwhile, hasn't had a significant hardware update for the Apple TV since 2010, when it swapped out the first generation model with hard drive storage, for a more streaming-centric model with a small 8 GB NAND flash cache.  The only major hardware feature offered in a 2012 refresh was the inclusion of 1080p HDMI output.  The 2013 update brought virtually no changes.

Roku has far and away been the most aggressive in terms of hardware updates, with 19 different hardware releases since 2008, including its just-launched second-generation streaming video stick.

Price is probably the biggest sticking point, however.  The current prices of the three platforms are: The Apple TV is on the more expensive side, while not necessarily offering more compelling features.  Overall, the current pace of sales indicates that Chromecast and Roku could pass Apple TV, if they can solve their individual hurdles.

IV. Google, Roku Face Challenges of Their Own

For Roku the big challenge is expanding its international sales footprint.  

Roku LT
Roku needs to expand its international presence.

For Google, the challenge is keeping users active and invested.  Parks Assoc. released numbers indicating that Google Chromecast usage (in total hours for all users) was down.  
Google Chromecast usage

Google responded by releasing its own numbers showing that in active devices usage minutes/hours were up.

Chromecast usage
Google claims Chromecast usage is actually up. [Image Source: Gigaom]

Parks Assoc. analyst John Barrett commented in response:

The two data sets are…not contradictory because average use among active users can be increasing even while the percentage of owners using the device is declining.

Still, with fresh Chromecast apps waiting in the wings (thanks to the Q1 2014 release of a third party Cast SDK), Google could see a resurgence in usage as sales continue to be robust.

Parks Assoc. estimates that by 2015 one in four houses will have a streaming video player, such as an Apple TV, Chromecast, or Roku.  Further, it predicts that by 2017 there will be 50 million streaming video players sold a year.  Its latest data show Roku as the clear leader in usage, with Apple in second.
Roku v. Apple
Roku leads Apple TV in usage. [Image Source: Parks Assoc.]

Analyst director Barbara Kraus comments:

Multiple factors have allowed Roku to outpace Apple in U.S. sales and usage.  Roku has always had a close association with Netflix, the largest source of video downloads, and currently offers more than 1,700 channel apps as well as a choice of models with different features and price points, all of which appeal to consumers' purchasing instincts. With Amazon entering this CE category, there will be renewed pressure on all players to develop the best combination of 'can’t miss' content with a simple and intuitive interface.

She predicts Apple will release a new set-top box later this year.
V. Fire TV and the Potential for an Apple Smart TV
Looking ahead it's important not to count out Sony Corp. (TYO:6758), NETGEAR, Inc. (NTGR), and TiVo, Inc. (TIVO), all of whom are taking a piece of the streaming video pie, as well with various devices.
And then there's, Inc. (AMZN).  Already a giant in the publishing industry and tablet/eReader market, Amazon in April launched "Fire TV", a set-top box based on its Fire OS Android branch.

Amazon Fire TV

Similar in many regards to Apple TV, the set-top box retails for $99 USD.  Key selling points of the new Amazon device include voice search and slick integration of the Amazon Prime video service.  Amazon also boasts its set-top boxes has "four times the processing power" as the Roku.

Amazon Fire TV
Fire TV is powerful -- according to Amazon.

It's too early to tell if Fire TV will be a strong challenger to Roku, Google, and Apple, but thus far Amazon has been very selective in its first-party hardware releases, rarely disappointing, so the outlook seems good.  And in some ways, that could be good for Apple, as well, says Ms. Kraus.

She comments:

While approximately 50% of U.S. households have at least one Apple product, such as an iPhone or iPad, the company has not yet been able to leverage this success for its Apple TV offering.  Apple has not committed support and promotion to its Apple TV product line in the U.S., and its sales reflect this fact. But they are the global sales leader in this category, having sold approximately 20 million units worldwide as of April 2014, compared to an estimated eight million for Roku at the end of 2013. As Amazon, the world's largest online retailer, emerges as a new competitor in this space, it could awaken the sleeping giant that is Apple.

Meanwhile rumors persist that Apple will release a "Smart TV", essentially integrating Apple TV into a normal LCD TV frame.  

Apple TV Shiny

A recent press release from Parks Assoc. indicated that 34 percent of broadband homes in the U.S. have at least one Smart TV.  And Roku already has partnerships with LCD TV makers to add its set-top box technology to their Smart TVs.

Sources: Parks Assoc., Gigaom

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