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TheStreet Open House

Apple TV Races to Regain Past Dominance as Roku, Google Take Lead

NEW YORK (TheStreet) -- Apple (AAPL) has lost market share in the domestic Internet-connected set-top box business that it once pioneered and dominated, according to research firm Parks Associates, putting the world's largest company behind Roku and its largest rival, Google (GOOG). That puts the company in the position of having to struggle to catch up with its own past.

Apple is now in third place, according to the latest data, as the research firm indicated that Apple sold slightly more than 2 million of its $99 set-top box in the U.S. in 2013, compared to an estimated 3.8 million Chromecast streaming dongles (retails for $35) and 3.8 million devices for Roku. The report also notes that Apple lost share in the first quarter of this year, with Roku taking market share in both usage and devices sold. Roku has several choices, ranging in price from $49.99 to $99.99. Plus, the company announced Roku TV at the Consumer Electronics Show in January of this year, a move to get away from set-top boxes and into actual televisions.

The report comes as more Internet-connected devices come into the home. After the first quarter of 2014, more than half of all U.S. households had consumer electronics connected to the Internet (smart TV, connected Blu-Ray player, connect game console, set-top box and or a digital media receiver), as companies make the push into the "Internet of Things," a phrase first coined by Cisco (CSCO) to include devices outside of PCs, smartphones and tablets.

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At Apple's annual shareholder meeting, CEO Timothy D. Cook noted that Apple TV did over $1 billion in revenue for the company in 2013, and is no longer classified as a "hobby," something which former CEO Steven P. Jobs initially referred to the $99 set-top box as.

On Apple's fiscal second-quarter earnings call, Cook noted that the content on Apple TV is getting better all the time, and the company is working on making it better. "We've sold now, [sic]about 20 million of the Apple TV, and so we've got a pretty large installed base there," Cook said on the earnings call. "And I'm feeling quite good about that business and where it can go."

Stepping back and looking at the picture globally, Apple is back on top, having sold more than 20 million devices since the device was introduced in 2007, whereas Roku has sold over 8 million devices in America, according to the company's Web site. Chromecast was introduced in the second half of 2013.

Google also recently introduced Android TV, which will let users watch live TV or stream content from apps such as Netflix (NFLX), Hulu, and others, much like the other set-top boxes allow. True to the company's key mission, Google built a search experience into Android TV. In addition, Google also built a gaming experience into Android TV, similar to what Amazon (AMZN) has done with its own set-top box, Fire TV.

Apple has been hard at work adding new content to its set-top box in recent months. In February, Apple added the WWE Network (WWE), as well as an entire channel to The Beatles. In June of 2013, it announced partnerships with HBO GO, WatchESPN, Sky News, Crunchyroll and Qello that offer live news, sports and current TV programming, the company said at the time. In November 2013, Apple added more partnerships including ones with Yahoo! (YHOO) and PBS.

The report comes amid speculation Apple will announce a new device later this year or early next year. In addition to a hardware refresh, a new version of the set-top box could have a dedicated App Store, Siri support and gaming compatibility.

--Written by Chris Ciaccia in New York

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