This Little $35 Device Could Change the Smart TV Market

This Little $35 Device Could Change the Smart TV Market

Google recently surprised investors when it released its $35 digital media streaming adapter, Chromecast. Chromecast is a unique product compared to the full-featured smart televisions that some of its industry peers have produced, and has been met with mixed reviews. Can Chromecast finally help Google take over the elusive television market, or will it fade away, as previous attempts have before it?

Not everyone needs a smart television
Chromecast isn't really a new idea, since Roku streaming video players, which start at $50, were already developed from the idea that not everyone needs an Internet-enabled television. Apple's Apple TV set-top box, which became a lot smaller in its latest revision, costs $99 and shares the same idea.

Both devices allow users to stream digital content, such as YouTube and Netflix, from the Internet. They also allow users to share photos, music and video from computers across their home networks. Although Chromecast doesn't bring anything new to the table, it is the smallest. The device resembles a USB flash drive and has the easiest setup routine, according to online reviews. Chromecast is also cheaper than Roku and Apple TV, but does not include a remote control, which is standard with the other two products.

It's all about the content
Roku has the largest amount of content of the three, with access to Netflix, Hulu Plus, Amazon Instant, HBO Go, Pandora and others via third party apps. Roku also offers additional exclusive streaming content for its users. However, Roku notably lacks a YouTube channel. Apple TV has most of the same third-party content as Roku, has a YouTube channel, and uses iTunes to access TV shows, movies, and podcasts. Chromecast has the least dedicated content, and is limited to Netflix, YouTube and the Google Play store.

However, Chromecast and Apple TV both support mirroring -- the technology that allows a computer or tablet's video output to be streamed onto the television. This means that although Chromecast lacks native support for HBO GO and Hulu Plus, the content can be played on the PC and mirrored onto the television.

An increasingly saturated market
According to a survey from Parks Associates, 37% of homes with streaming media devices in the U.S. currently use Roku, compared to 24% using Apple TV. Since 2011, the number of households using an Internet streaming device rose 14%, with much of that growth attributed to video streaming sites like YouTube and Netflix.

For Apple, Apple TV has never been a meaningful source of revenue. However, a persistent rumor suggests that Apple will release a full-featured "smart television" on par with current products from Sony and Samsung to erect a third pillar of growth. More far-fetched rumors claim that the Apple TV will not only be a full-featured smart television, but will come with second-screen tablets and a ring-shaped remote control.

With the arrival of Chromecast, a full-featured Apple smart television seems unlikely, since it will be a substantially lower-margin business than its current set-top box. Sony and its Japanese industry peers have spent years dragged down by the ailing television business, which doesn't make it a lucrative market to dive headfirst into.

Don't count Microsoft out yet
Although set-top streaming boxes are an interesting niche market, investors should also pay attention to Microsoft's Xbox One, the company's $500 game console that the company hopes will revolutionize living room entertainment by combining console gaming, media streaming and personal computing into a single package.

The Xbox One is the antithesis of Chromecast, a monstrous Goliath towering over Google's David. The Xbox One has access to more content than Chromecast and Apple TV, and has nearly the same amount of content as Roku, as well as YouTube access. However, the Xbox One notably lacks mirroring technology.

Foolish final thought
It's important to remember that the Chromecast, Apple TV, and Xbox One aren't the respective core businesses of Google, Apple and Microsoft. Rather, they represent attempts to force users to become dependent on their ecosystems, which can be unified through mobile devices, personal computers, and television sets.

Unifying these ecosystems will generate higher sales of other related products, and in this respect Google has a strong lead thanks to our reliance on its ecosystem. Apple and Microsoft, on the other hand, are still struggling to build that ecosystem to retain users. If Google claims a substantial part of the streaming set-top market with Chromecast, then it will win a key battle in expanding its defensive moat against Apple and Microsoft -- and that's why this little $35 device matters.

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Leo Sun owns shares of Apple. The Motley Fool recommends Apple and Google. The Motley Fool owns shares of Apple, Google, and Microsoft. 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.

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