Is Chromecast Really a Cable Killer?

Howard is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

Last week, Google (NASDAQ: GOOG) released their new device, the Chromecast, which will stream video services directly to an HDTV through WIFI. Hype has started to build around the Chromecast as a “cable killer.” But while the Chromecast won't actually have a noticeable impact on cable, it will still threaten other markets --  and bring in some nice revenue for Google.

Why Cable Will Not Be Killed

Stating that the Chromecast will be the downfall of cable as we know it is pure overspeculation. It's true that cable providers are under more threat to outside competition than ever before, with video services like Netflix (NASDAQ: NFLX) and Hulu offering cable-free video streaming and even original programming of their own. Now, even channels like HBO provide ways to view their content over the internet.

The Chromecast just provides a way to access various video services on your television that were already accessible to customers through other means. As of now, it doesn't even provide original programming. According to the FCC, cable is a fixture in over 80% of households. To say that a dongle that will bring nothing new to the table can take down that industry is unbelievable.

Who should be afraid?

As it stands now, Chromecast competes with the Roku and Apple TV. The Roku player is priced higher than the Chromecast, with low-end models at $40 and newer models selling for $99. Roku offers a large selection of channels, and includes apps for Amazon instant video and Vudu. It can also access content from external memory drives.

Apple’s (NASDAQ: AAPL) Apple TV provides a large selection of apps including HBO Go, Hulu, and Netflix. Apple TV is the only streaming box that has deals with the NBA, NHL, and MLB to stream games from their individual services. Apple TV can also stream to most iOS devices and access content from iTunes. It is, however, priced much higher than the Chromecast, at $99.

The Chromecast currently offers apps from Netflix and YouTube, and is unique in that it can stream the Chrome web browser to a connected TV from a PC or Mac laptop. Other video services including HBO Go, Hulu, and music service VEVO have stated they are developing apps for the Chromecast.

After you plug the dongle into your TV's HDMI port, you can operate Chromecast from most Android and iOS devices. With a cheap price of $35, this gadget will be strong competition for Apple and Roku, especially if Google continues to bring in more apps.

How Will Google Profit?

The Chromecast will have a large potential customer base to sell to. Device sales, however, are not the largest potential revenue source for Google.

With every unit sold, Google will now have information on the viewing habits of its customers. It will know what viewers like to watch, where they watch it, and on what device. This will allow Google to do what it does best: sell specialized ad placements.

In 2012, Netflix released its original series House of Cards, which was produced based on viewing habits like favorite director and actors. The critically acclaimed show was a success for Netflix, and could start a trend of a new way to produce original shows and movies. Google will have this information to sell to other producers trying to replicate Netflix’s success.

How the Future Looks

After being on the market for only a few days, the Chromecast is already selling out. That's good news for Google, its ad customers, and content providers hungry for viewing information. But it's bad news for Roku and Apple. With third-party apps in development, the Chromecast will have more features to offer in the future to compete with Apple and Roku. While it won’t kill cable, the Chromecast is looking as if it will be the killer app in streaming devices. 

Howard Cranford has no position in any stocks mentioned. The Motley Fool recommends Apple, Google, and Netflix. The Motley Fool owns shares of Apple, Google, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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