- Amazon pulls out Apple tv and chromecast from online and partner stores.
- Amazon, Apple and Google gearing up for streaming service war.
- Netflix likely to come out unscathed.
In a stunning move, Amazon(NASDAQ:AMZN) recently decided to ban Apple tv and Google chromecast from their online store. On one hand this limits consumer choice; however, on the other, Amazon has to protect itself. Following the news Amazon’s stock price gained 2.21%.
Continuing with the sales of more successful Apple tv and Chromecast is akin to giving your enemy weapons to fight you with. Quite simply, Amazon’s fire tv have failed to sell the numbers that Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) enjoy. According to data from Frost & Sullivan, Apple has a 40.6% streaming box market share, followed by Google 34.1%, and Amazon panting in at 8.0%.
This decision might seem like a petulant child running home with the football after losing a game to stop his friends from playing; however, the streaming market is a game-changer. You see, consumers are simply not upgrading their devices as often as they used to. Therefore, revenue from streaming is fundamental to the bottom line of these large tech companies.
Secondly, streaming subscriptions are good ‘bait’ for bringing people into respective ecosystems. For instance, Amazon offers unlimited streaming so long as people take Amazon prime. Apple and Google are using similar tactics but to a smaller extent.
Arrival Of Apple TV
The timing of this decision couldn’t be better. Apple has their new Apple tv incoming, and its features go toe-to-toe with Amazon’s Fire tv. Amazon knows that this release will come with a considerable marketing push which could allow Apple to grow its market share even further. This is a move to protect the long-term future of their own product line.
Once consumers start curating content on favored streaming platforms there is rarely an incentive to leave. It is this ‘locked in’ aspect which tech companies love.
It is vital to note that there is still a lot of room for growth in the streaming sub sector. For example, Spotify is the biggest player in music streaming; however, it has a lot of people on their free tier.
Proliferation Of Superfast Broadband
Interestingly, this is a market that would’t have been possible 5 years ago. The proliferation of superfast broadband speeds has made this possible. Further, there is still a lot more room for growth because there are millions of consumers in the western world who simply don’t enjoy the speeds required for smooth streaming of multimedia content. In 5 years, a streaming subscription is likely to be as ubiquitous as a cell phone plan.
Consequently, it is of little surprise that tech companies are falling head-over-heels to give themselves a good stand in a rapidly growing sector. For instance, to further entice consumers, Amazon signed a deal with ex Top gear presenters Jeremy Clarkson, James May, and Richard Hammond. This was a move that emphasized Amazon’s commitment to streaming and understanding of what it takes to succeed in this sector.
One company that is succeeding in this sector and is likely to come out of this war unscathed is Netflix (NASDAQ:NFLX). Apple, Amazon, and Google have been forced to make sure that their streaming boxes work with Netflix. Why so? Netflix has an enviable portfolio of shows. Orange is the new black, House of Cards, and Daredevil, just to name a few.
The Apple Ecosystem
The war of exclusive content and attractive bundle offerings is another that will continue to brew. People will spend their money with whoever has the best catalog. And this is where Apple shines. They have an app store filled with apps that can easily be made tv-compatible, a huge music store, and premium games which work across much of their product line. Apple also made their incoming Apple tv compatible with wireless controllers. The chance to buy one game, song, or movie, and have it playable/streamable on an iPhone, iPad, and Apple tv is an attractive one.
I won’t be surprised to see Apple bundle games, music, movies, and tv shows under one subscription in the not too distance future.
Apple’s dominance of streaming set-top boxes isn’t just due to innovation. At the end of the day, they all do the same thing. The power of Apple’s status as a superbrand is also driving adoption. Although Apple tv is considerably more expensive than the competition, when given a choice having an Apple tv in your living room is more prestigious than having a chromecast or fire tv. Moreover, millions of consumers are already locked into Apple’s ecosytem, and it is more ‘comfortable’ to stay.
In conclusion, if you are thinking of putting your money into this growing sector, I will go with Netflix. At the moment, their stock is up by a whopping 128% YTD. This is due to intelligent investors realizing that this battle will allow Netflix to grow. Netflix is the common denominator in this battle. So long as they continue to give consumers record-breaking shows they can watch this war pass over their heads and come out without a scratch.