U.S. Markets closed

New Roku set-top box could leapfrog Apple TV and Chromecast

Aaron Pressman

With more people than ever getting their daily TV fix over the Internet, the battle is heating up for set-top boxes that deliver online video.

Roku, the smallest of the competitors but the one that makes the most popular Internet box, unveiled an upgraded device on Tuesday. The new Roku 4 should keep the company comfortably in the lead for the 2015 holiday shopping season, ahead of similar recent upgrades from Apple (AAPL), Google (GOOGL) and Amazon (AMZN), analysts say.

Already one in five U.S. broadband households owns at least one streaming video box, according to Parks Associates. Last year, Roku dominated usage, with a 37% market share, Parks says. Google's Chromecast was second with 19%, trailed closely by Amazon Fire TV at 17% and Apple TV at 14%. The boxes connect to the Internet and a television set, allowing viewers to watch their online favorites on the big screen without the need for a cable subscription.

The most notable change to the new Roku box may be the price, which jumped from $100 to $130. As the streaming video market grows and matures, the segment of customers willing to pay a premium price for the most feature-laden set-top boxes is growing. Roku, which still sells several older models at lower prices, added faster Wi-Fi access, voice search and even ultra-high-definition 4K video compatibility to its newest box to entice the bigger spenders. That follows Apple's decision to release its new Apple TV starting at $149, up from the current $69 model that hasn't been upgraded in almost three years.

Roku's prime advantages remain its easiest-to-use interface and broad content offerings, with thousands of niche channels in addition to the big services everyone expects, like Netflix (NFLX), YouTube, Hulu and HBO, says Parks analyst Barbara Kraus. And Roku focuses just on making the best video boxes, not smartphones, search engines or ecommerce platforms.

Roku says there's a growing audience watching programming beyond its top 20 big channels -- viewers seeking out everything from Red Bull TV to a Pokemon channel for kids to Crochet Ever After. Yahoo Tech reporter Alyssa Bereznak has even listed the 15 craziest Roku channels.









"Roku doesn't have nearly the strength of brand of Apple, Google or Amazon," says Kraus. "Yet they're still leading in the U.S. People are exploring and looking for new niche content."

Apple's new boxes match many of the hardware features from Roku, except for 4K video compatibility. That may not matter much. Consumers bought fewer than five million 4K-compatible television sets in the U.S. and Canada last year, according to Strategy Analytics. And while Netflix, YouTube and Amazon's Prime video service each have some shows available in 4K, nearly all online video is still offered in less detail at lower resolutions.

"4K isn't absolutely vital in 2015," says Nick Petrillo, an analyst with IBISWorld who follows the set-top box market. "It's a good level of future-proofing for Roku."

Dividing up the competition

Amazon and Google remain more focused on the low end of the market. Google's second-generation Chromecast costs only $35, the same as last year, and doesn't come with its own remote control, relying instead on a user's smartphone to select programming. It does match the voice search and improved Wi-Fi of its more expensive competition, however.

Amazon's Fire TV is still $100 and its Fire TV stick, which resembles the Chromecast, remains $40. Amazon matches all of the premium features of competitors, including 4K video compatibility.

Amazon pioneered adding simple video games to its box and Apple is promising higher-end graphics for games on its new boxes. It's unclear whether there will be much demand for more complex gaming, however. Most hardcore gamers tend to spend more for a dedicated gaming machine like an Xbox or Playstation.

Apple is also going even a step further and adding full blown apps from third-party developers to its latest TV. A few of the apps that will be available on the Apple TV are Gilt's shopping app and Zillow's real estate app.

All four boxes promise big improvements in usability by letting viewers search across various services to find the shows or movies they want. And improvements in voice recognition allow users to talk to their boxes instead of trying to type out show names tediously with a remote control.

Come the holidays, all four lines should prove popular. But Roku's singular focus should keep the smallest player at the top of the charts.