Hillside Partners analyst Rory Maher examines Apple Inc. (NASDAQ:AAPL)'s sales of the Apple TV product as compared to Google's Chromecast as well as the Roku. Maher also examines YouTube's long-term outlook and how these various streaming devices will affect it.
Comparison of Apple TV demand with Chromecast
Over the Christmas holiday period we surveyed 200 Wal-Mart Stores, Inc. (NYSE:WMT) and 200 Best Buy Co., Inc. (NYSE:BBY) stores in 20 U.S. cities in order to measure and compare demand for streaming media devices Chromecast, Roku, and Apple TV. In addition, we looked at Amazon.com, Inc. (NASDAQ:AMZN) and Google Play data to measure online sales performance of these products.
Chromecast sales vs. Apple TV sales
We believe strong 2H13/4Q13 Chromecast sales helped drive 70% streaming media device industry growth in 2013. We believe Roku likely outgrew Apple TV in 2013 in term of Y/Y growth rate, but Apple TV remains the biggest player in the market with 50% market share. Overall we expect 8M Apple TVs were sold in 2013, 4.5M Rokus and 2.7M Chromecasts.
Chromecast likely outsold Roku
We believe our data indicates Chromecast outsold Roku during 4Q13 given inventory levels at brick and mortar retailers and indications of sales on amazon.com and the Google Play store. Specifically, we believe Chromecast significantly outsold Roku in Best Buy Stores, where the product had been sold since its Summer launch, and the Amazon bestseller list indicates Chromecasts outsold Roku through 4Q13. We estimate Google Inc (NASDAQ:GOOG )sold 2.2M Chromecasts during 4Q13 versus 2M Rokus.
Chromecast sales outperform Roku and Apple TV
The data suggests Chromecast shoppers frequented Best Buy Co., Inc. (NYSE:BBY) over Wal-Mart Stores, Inc. (NYSE:WMT) as Chromecast inventory was more depleted versus competitors at Best Buy but more available at Walmart.
We believe online sales were a major contributor to Chromecast share gains in 4Q13 and accounted for a greater percent of total sales than other consumer electronic products. Chromecast remained on the Amazon best-seller list for electronics through the Thanksgiving and Christmas period. In addition, we counted 553 reviews for Chromecast on Amazon from 12/25-12/29 versus 109 for Roku and 64 for Apple TV.
Original YouTube channel sub growth
Our YouTube tracking database indicates that original channel subscribers continue to grow at around 50% Y/Y, and grew 12% during 4Q13. We believe this indicates the still early stage of YouTube’s growth, especially among higher quality productions, despite currently being the largest online video property.
YouTube revenue likely $3.7B, $800M In mobile revenue.
We estimate 2013 gross revenue for YouTube will likely be $3.7B, growing 60% to $5.9B. We took the Company’s publicly-disclosed figure that it is monetizing 3 Billion videos per week and assumed a $15 CPM through in-stream video ads and accompanying banners. We estimate YouTube’s mobile business will generate just under $800M in 2013.
Google's OTT device sales to generate strong return
In our opinion, Google can generate strong returns from its OTT business without being the leading seller of OTT devices. We believe YouTube will remain one of the most popular OTT apps on any platform, whether it be Google Inc (NASDAQ:GOOG), Apple Inc. (NASDAQ:AAPL), or Roku. As a result, Google can generate OTT revenue from hardware sales, but at this stage it can also generate revenue from advertising sold against incremental YouTube viewing helped by increased device distribution.