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Amazonof (NASDAQ: AMZN) streaming device had a good start to the year. The company announced that it had reached 30 million active accounts on its Fire TV devices in January and that it already has about 4 million users up to now this year. Jen Prenner, chief executive of Fire TV, recently announced at an industry event that the company had reached 34 million active accounts.
In comparison, Roku (NASDAQ: ROKU) reported 29.1 million active accounts at the end of March. Amazon's advance is up from January, when it had about 3 million more active accounts than Roku.
For Amazon and Roku investors, it's important to understand where Amazon Fire TV's growth and growth potential come from.
Source of the image: Amazon
No. 1 everywhere
Amazon claims that Fire TV has become the first streaming platform in the United States, the United Kingdom, Germany, India and Japan. It sells at least one version of Fire TV in dozens of countries and the device works with Prime Instant Video in dozens of others. Roku's commercial footprint is comparatively smaller, with its activities concentrated in North America, parts of Latin America, the United Kingdom and France.
Indeed, Amazon's success in international markets could propel the growth of its Fire TV users. Amazon launched Fire TV in India about two years ago, while she was trying to convince Prime and her original video content on the huge market. Prime Video has quickly become more popular in India than Netflix, so it's no surprise that the affordable TV Fire TV key is popular in the market. Prime Video is also extremely popular in Germany and Japan, which has also made Prenner's list.
The international market presents a huge opportunity for streaming platforms such as Fire TV and Roku. Adoption is still in its infancy in many markets. In fact, Roku announced its intention to increase its investments in international markets in its fourth quarter letter to shareholders.
"We are still in our infancy on the international stage, and international distribution should not be a major driver of account growth in 2019," the management said. "We expect more and more benefits from these investments in the growth of international accounts in 2020 and beyond." Thus, Amazon's international leadership could continue to grow before Roku can start catching up, if that happens.
Can Roku catch up?
Roku has some advantages over Fire TV.
First and foremost, this is largely the agnostic of streaming services. The priority of Fire TV is Prime Video. If you're not a primary member, the Fire TV UI might be a lot less appealing than Roku's.
That said, Roku has invested heavily in The Roku Channel, which offers its own licensed content library. And management has already voiced its aspirations for a content-driven user interface. This could cause Roku to redefine its home screen to put more emphasis on the Roku channel. At least for the moment, Roku does not push you to a specific streaming service.
Second, Roku shows great strength in the smart TV market. Mangement claims to have achieved one-third of all sales in the United States in the first quarter. While consumers may be replacing existing TVs with smart TVs, Roku's dominance of the market may allow it to take on Amazon as the operating system is integrated with television.
Roku is still a small international player in smart TV sales. But the more diversified market and the more diversified range of manufacturers should allow it to significantly increase its market share over time.
Yet Amazon benefits from an ecosystem of services that drive sales of Fire TV devices. Premium members will likely prefer Fire TV to Roku for easy access to Prime Video content. Consumers who wish to have access to Alexa, the voice assistant of Amazon, will not find many cheaper options than a TV stick. Amazon is building an ecosystem that could keep users on its platform despite Roku's efforts.
The market for connected streaming devices continues to grow for the moment, so both companies can gain new customers. But the gap between Fire TV and Roku is something that investors should be watching to indicate the relative power of each platform.
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