Just how much does Google Inc (NASDAQ:GOOG) hate cable companies? Enough to create a low-margin device that lets cord-cutters stream the entire Web to a TV.
Google Inc (NASDAQ:GOOG)’s Chromecast costs just $35, but the rebellion it’s kicked off is likely to be worth billions. Every major cable and satellite operator faces the prospect of having consumers cancel service because of the what the dongle can do.
Not that they need the push. A recent study from research firm GfK found that more than 19% of U.S. households use antennas to capture free over-the-air broadcasts, up from 14% in 2010. Some 60 million Americans refuse to pay for basic cable or satellite as of this writing.
A portion of this group can afford pay TV but would rather stream. These are the early adopters most likely to try Google Inc (NASDAQ:GOOG)’s Chromecast. I’d also guess they account for at least a plurality of Netflix, Inc. (NASDAQ:NFLX)‘s 30 million domestic streaming subscribers.
Meanwhile, investors are left to wonder whether Chromecast’s arrival spells trouble for Apple Inc. (NASDAQ:AAPL). The prevailing wisdom says the dongle makes Apple TV obsolete. No more would consumers need to spend spare dollars on iTunes credits when the entirety of the Internet is available for just $35. Or so the thinking goes.
Yet the true potential of disruptive technology is rarely so simple. Very often, disruptions create unintended or unforeseen consequences. Think of Tesla Motors and how proving the electric-vehicle concept has made consumers more interested in hybrid cars. Ford Motor Company (NYSE:F)‘s hybrid sales have never been higher than in recent years.
We’re too early in the process to know how Google Inc (NASDAQ:GOOG)’s Chromecast will affect Apple Inc. (NASDAQ:AAPL)’s entertainment business, but I see three reasons for Apple investors to welcome the device:
1. Tablets are televisions, none more so than the iPad. In its latest quarter, Apple Inc. (NASDAQ:AAPL) sold another 14.6 million iPads last quarter. More than 100 million of the Mac maker’s tablets are now in use around the world. An increasing number stream TV and movies. According to another GfK study, millennials (those born between 1977 and 1994) spend 23% of their time watching TV and video on tablets. The law of large numbers says a good portion of this group — a natural audience for Google Inc (NASDAQ:GOOG)’s Chromecast — uses iPads to get their video fix.
2. iTunes has a massive and engaged installed base. Meanwhile, Apple Inc. (NASDAQ:AAPL) has a huge installed base when it comes to TV and video rentals and sales. Every day, viewers download more than 800,000 TV episodes and 350,000 movies from iTunes. Other than Netflix, Inc. (NASDAQ:NFLX) and possibly YouTube, no other service has proved to be so adept at giving viewers access to top-rated content.