Will Amazon Web TV Take Out Roku and Apple TV?

NEW YORK (TheStreet) -- A brand new Web TV device will be popping up from Amazon this month -- that is if Peter Kafka of Re/code and other indications are correct.

Amazon (AMZN) is said to be moments away from releasing its own device to compete against a growing field of competitors including Apple TV (AAPL), Netgear NeoTV (NTGR), Google (GOOG) Chromecast, Roku, Sony (SNE), and others.

After several fits and starts, it appears this time is for real.

Apple seems skittish about the rumor. As reported Friday, Apple is offering a rare discount promotion on Apple TVs bought by March 5. U.S. consumers who buy an Apple TV box between February 28 and March 5 can receive a $25 iTunes gift card. An Apple discount this time of year is so unusual that expectations of a forthcoming next generation Apple TV box increased dramatically.

If Amazon is truly days away from product release, an Apple TV discount is a preemptive strike against Amazon's entry. And if Apple is nearing its own update, it's motivated to clear the shelves.

But for now, the set-top box king is Roku. The small, privately held company is the market leader. It's also beloved by tech critics like TheStreet's own Rocco Pendola, who said that the Roku 3 "nails this one across the board" and crushes the Apple TV.

According to Parks Associates, Roku enjoys the pole position in video streamers with about a 37% market share, followed by No. 2 Apple TV at 24%. Parks also predicts the number of devices will almost double to around 330 million by 2017.

I have my doubts.

Although I don't believe the tiny black box sales has peaked, it appears more likely to me that the separate Web TV boxes will merge into the TVs themselves, creating TVs with internal Internet streaming capabilities. Then consumers wouldn't need an external box at all. Those network-capable TVs are available and are becoming more popular.

While shopping for a TV recently, I've noticed how the price difference between non-networked TVs and Internet-capable TVs is shrinking rapidly.

For many TVs, especially 50-inch and below, the price of a networked TV is about the cost of buying a normal TV and Web TV box separately. For larger TVs, a price advantage is available for many smart TV models compared to buying two separate devices. Plus this ignores the convenience of having one unified device instead of a separate streamer box with an adapter cord, an HDMI cable and connections and yet another remote that can get lost, out of reach or out of batteries.

Really, Internet-capable TVs aren't considered all that advanced anymore. They're becoming the norm.

There's a step up, too: "smart" TVs. These are really a merger between simple computers and TVs, and are increasing in popularity. They offer internet browsing and more features than plain Internet-capable TVs, which are limited to installed apps like Netflix (NFLX) and Amazon Prime.

As technology moves forward, expect the streaming set-top box hardware to migrate inside TVs. Apple TV, Roku, and others will fight for software licensing deals with TV manufacturers instead of focusing on separate retail and virtual shelf space.

Talk of an imminent Roku IPO announcement lends creditability to insiders wanting to cash out while the going is good.

Moving back full circle to an Amazon Web TV box release, if I were an investment bank managing the deal book for Roku, I would burn both ends of the candle to get the deal done yesterday. The similarities between Roku and BlackBerry (BBRY) are unmistakable.

  • BlackBerry shares peaked at $128 during June 2008. On July 11, 2008, Apple released its next-generation iPhone. During October 2008, the first Android-based phones went on sale. Since then, BlackBerry has plummeted.
  • Apple is currently expected to release its next generation TV soon. Amazon is expected to release its Web TV product with an Android operating system. Roku will have to contend with both.
  • Google entered the smartphone hardware business through Motorola. Google entered the low cost Web TV hardware business through Google Chromecast. Google has the muscle and the money to squeeze competitors like Roku.

Roku should be worried.

It's difficult to imagine a niche start-up surviving in a space aggressively sought after by Apple, Google, Sony, Netgear, and even Amazon. It would be that much harder for Roku to flourish with growing revenue and margins.

The set-top space is getting crowded. It's something to think about if and when Roku has an IPO.

At the time of publication, Weinstein held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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