Roku beats Apple to the TV market

If its Apple TV is ever to be more than a 'hobby,' Apple better get busy

Apple has called its Apple TV set-top box a "hobby" since it first launched the device seven years ago. Since then, Apple has refined the Apple TV repeatedly -- adding high-profile streaming content, developing AirPlay as a way to stream content from a Mac or iOS device and adding mobile device management (MDM) features that allow schools and businesses to remotely configure Apple TVs in classrooms and conference rooms.

Despite those advancements, and Apple CEO Tim Cook's acknowledgment last year that Apple has sold 13 million Apple TVs (half of them between 2012 and early 2013), the device has yet to shake its "hobby" moniker.

There's been a common assumption that Apple's real motive is to develop a platform and the needed partnerships to launch a full fledged HDTV, no set-top box required. Predictions along those lines have come from analysts like Piper Jaffray's Gene Munster and were even called out in Walter Isaacson's biography of Steve Jobs, where Apple's late CEO said he had "finally cracked" how to disrupt the television industry much as Jobs and Apple disrupted the music and mobile industries.

But Apple has yet to turn Apple TV into anything more than it is now, and on Monday one of its biggest competitors may have beaten it to the gate.

Roku, which first shipped its own set-top box for streaming Internet content in 2008, announced at CES 2014 that it has partnered with Hisense and TCL of China to bring to market HDTV models ranging in size from 32-in. screens to 55-in. screens. All models will include built-in Wi-Fi and deliver the full Roku experience, plus traditional broadcast television channels. Users will get Roku's Channel Store, which boasts 1,200 streaming services, many of them developed by broadcast and cable/satellite networks. Users will also be able to navigate content using an iOS or Android app and the devices will feature "casting" support that will allow users to project content from mobile devices or PCs onto the TV screen -- similar to the integration of Apple's AirPlay service in newer Apple TV models.

Roku has been the primary competition for Apple in the smart or connected TV market and the two companies largely dominate that market. As Apple has sold more than 13 million Apple TVs, Roku has wracked up sales of 8 million devices across its lineup. According to market research firm Frost & Sullivan, the two companies represented more than three quarters of the global streaming device market in July 2013. (Apple had 56.1% of the market to Roku's 21.5% at the time.) A separate study from Park Associates the following month showed Apple in a more precarious place: It found that among U.S. households with a streaming device, 37% used Roku hardware while 24% had an Apple TV.

The advantages of deep integration

There a number of potential advantages to having deep integration with both the TV and content providers.

The most significant of these is the ability to control the entire user experience. When setting up or using any of Roku's existing devices or an Apple TV, you need to use the remote that came with the TV to navigate to the appropriate input. Although this is rarely a herculean task, there is a clear delineation between the experience of your TV's menu system, some of which are poorly designed and confusing. The user experience, however, doesn't always stop there. Other devices like cable boxes, DVRs, Blu-ray players and game consoles that users navigate on a regular basis each has its own interface making for a disjointed user experience from the get-go.

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