A report out this week from IHS claims that Apple is now in third place in the global set top market based on revenues in 2015. First and foremost, Apple TV devices are not set tops in the sense that you cannot watch traditional linear TV on the devices, and secondly, claims such as these made by research firms are simply desperate attempts at sucking up to the world’s largest company.
IHS reports that Arris is way out in front at around $3.5 billion, followed by Technicolor with $2.5 billion for set top revenues in 2015, thanks to the acquired assets of Pace and Cisco, respectively. The two front runners are hardly surprising, but it claims that Apple recorded some $1 billion in revenues from Apple TV devices last year, from 10 million shipments – which was apparently enough to snatch the bronze medal.
It’s worth noting that Apple TVs are sold at retail and therefore the retailer takes a large chunk each time it sells one of the $149 32Gb or $199 64Gb devices. Therefore, measuring revenue alone is not an entirely accurate portrayal of the larger picture – how much profit Apple is actually making from its OTT streaming devices is another matter.
If IHS classifies Apple TV devices as set tops then this means that streaming devices from Roku, Amazon and Google are also set tops. Apple has sold about 10 million more Apple TVs than Google has shifted Chromecasts, with 37 million sold since the 2007 launch. However, Chromecast’s 27 million sales in 2.5 years is on track to surge past Apple, likely within the next year and almost certainly within the next two. Roku has shifted some 20 million units ever, and Amazon’s Fire line has made good progress since its 2014 launch – shifting around 10 million units.
There is also no mention of set top shipments from Huawei and Samsung – Huawei has a huge dominance in China and Samsung has major cable companies in the US such as Time Warner Cable and the largest cable operator in Europe in Liberty Global, using its cable set tops. While both technology giants are openly boastful about smartphone shipments, figures on recent set top operations are non-existent, but Faultline remains skeptical over whether Apple TVs really brought in more revenue than the set tops of Huawei and Samsung.
For total number of device shipments, Apple is in fifth place behind Arris, Technicolor, Skyworth and ZTE, according to IHS. It adds that overall shipments last year grew 4.8% to 353 million units, with IPTV in China a notable driving factor. But an increase in set top shipments did not equate to a growth in revenues, which fell 5.4% to $22.2 billion for 2015, due to shrinking demand in North America.
Contrasting recent results from a Parks study, which rightly classifies Apple TVs as streaming devices not set tops, found that Roku devices were the most popular brand during Q1 2015 and Q1 2016, accounting for 30% of all streaming media players. Amazon and Google devices were on level pegging at 22% each, followed by Apple TV with the smallest market share with 20%.
An overhanging issue for Apple is the pressure of knowing that it must bolster its content business if it is to more aggressively compete against Google, Amazon and Netflix and become less reliant on its slowing smartphone business, and TV sector, which has underperformed by its own high standards. Hence the recent reports that Apple is interested in Time Warner – the owner of HBO and Warner Brothers studios. After introducing Apple Music and upgrading the Apple TV, there has been speculation that the next step must be a video streaming service to challenge Netflix and Amazon, where both invest huge sums of money in original content.
Negotiations with TV networks such as CBS and 21st Century Fox to license content for a live TV service fell apart last year and since then, Apple has focused on obtaining exclusives or original programming for Apple TV. However, talks have never got beyond the preliminary stage, according to a Bloomberg source, and with a market cap of over $55 billion, Time Warner would be hard to acquire for Apple which keeps nearly all its $200 billion cash mountain outside the US. Bringing it home may have tax and currency complications.