The contest is now closed. Earlier today I reviewed the new Apple TV player in a head-to-head comparison with Roku's new XDS model. As a result, I have one extra Apple TV unit to give away to a lucky reader of my blog. To enter the drawing, all you have to do is leave one comment on this post and make sure you submit the comment with a valid email address. The drawing is open to anyone with a mailing address in the U.S. or Canada and the winner will be selected at random on October 18th. I'm also giving away a Roku XDS unit and you can enter that drawing here. Congrats to Gina Sepowski who won the Apple TV.

[Updated Sept. 4th 20102:Check out my new review at: “Roku 2 vs. Apple TV: How To Chose The Right $99 Streamer“]

What’s better, the new Apple TV or the newly announced lineup of Roku boxes? That’s the question I keep getting asked now that both devices are in the market. Over the past week, I’ve had the chance to use both the Apple TV and a Roku XDS model and here’s my review on how they stack up in a head-to-head comparison. Before the review, I think it’s important to note that while many in the media are quick to compare and mention devices like Apple TV, Boxee, Google TV and Roku to one another, those aren’t fair comparisons. The four similar devices that should be compared are Apple TV, Roku, Sony Netbox and Western Digital’s WD TV Live Plus media player. While I’ve used and have all four devices, for this post I’m going to focus exclusively on Apple TV versus Roku. (I’m also giving away an Apple TV and Roku)

Hardware
The new Apple TV has HDMI, an optical audio connection, ethernet, WiFi (802.11a/b/g/n) and a USB port which Apple says is for “service and support” of the unit. The device supports video up to 720p and also comes with a remote and power cord with no power brick. Apple TV retails for $99 and while some units have already shipped, the Apple website currently lists a 1-2 week ship date for new orders. Apple offers a one year warranty on their device and consumers can extend the warranty by another year for $29.

Last month, Roku announced a new lineup of three boxes called the HD, XD and XDS. For the purpose of the comparison with Apple TV, I used Roku’s top of the line model, the Roku XDS. The XDS has HDMI, optical audio connection, component, composite outputs and USB. The device has support for WiFi (802.11a/b/g/n), supports playback of video up to 1080p and comes with a remote and power supply. The XDS retails for $99 and is shipping today from Roku.com or next week from Amazon.com. All of Roku’s boxes comes with a one year warranty and you can add a second year for $14.99.

When it comes to the hardware, Roku beats the Apple TV hands-down. All three Roku models, even the cheaper ones, support 1080p while Apple TV stops at 720p. While I’ve seen some argue that the lack of 1080p support by Apple TV is not a big deal since not many content owners are streaming in 1080p today, who wants to have to buy a new device a year or two from now in order to upgrade? The Roku boxes are future proof as they ensure that when 1080p is prevalent, their boxes will be ready. Some details have emerged saying Apple TV can play 1080p content from iTunes, but it can still only output in 720p.

Another hardware advantage that Roku has over Apple TV is that you can hook it up to older TVs that may not have an HDMI connection. Clearly Apple is targeting users with newer TVs that already have support for HDMI, but for $99, do you want a device that has more connection options or fewer? I would argue that even though HDMI is the future, that is no reason for Apple not to support other options, especially since many older TVs only support 720p, which is what the Apple TV maxes out at. So on one hand Apple only supports the new HDMI connection for newer TVs, yet doesn’t support 1080p which most new TVs support. That does not make a lot of sense.

While both the Apple TV and Roku XDS have USB ports, only the Roku model supports playback of local content via a USB drive. Apple says that the USB port on the Apple TV is only for “service and support” and while one could imagine a future software upgrade to enable the port to playback local content, Apple TV can’t support it today. The Roku unit supports .mp4 playback and will be including support for .mov next month. Owners of the older Roku HD-XR models will also be able to get support for 1080p and the playback of local content via USB in a software update that will come later this year. Apple TV supports playback of .m4v, .mp4, or .mov files but only via sharing within iTunes, not via any connected drives.

When it comes to the remotes, Roku again has the edge in a few areas. One of the things I don’t like about the Apple TV remote is that it doesn’t take standard sized batteries. It’s not a huge deal breaker, but I have a lot more triple AAA batteries lying around for the Roku remote, than the watch sized battery that the Apple TV remote takes. All three Roku models ship with a new remote and the two XD models support what Roku calls “instant replay”. The technology allows you to skip back in 10 second increments while a video is playing without having to re-buffer the stream and works very well. Owners of older Roku models can buy the new remote which enables the instant replay feature.

Software & Content
Not surprisingly, the interface on the Apple TV is a lot smoother, cleaner and more polished than navigating on the Roku. But while it looks nicer, navigating the Apple TV interface is not as easy as it should be and requires far too many clicks to enter text or passwords. Apple uses a long list of letters that you have to scroll through and have to travel end-to-end as opposed to being able to skip around. Having to enter a lot of text is a real pain. Apple TV is a bit easier to setup than the Roku, but not by much. I could give either device to my Mom and she’d be able to setup both devices on her own without having to call me for tech support.

As for the content available on both devices, this is really where Apple TV falls short. Today, Apple TV supports content from Netflix, YouTube and $0.99 rentals from ABC, Disney, Fox, and the BBC. They also support some free Internet content from folks like Revision3 and others, but all of that content is lumped in under the Podcast heading in Apple TV, so most folks probably don’t see it. Apple gives you 24 hours to watch movie rentals and 48 hours to watch TV shows once you begin viewing. When Steve Jobs announced the Apple TV he made a big point to reinforce the fact that Apple would have HD movies available to rent on the same day they are released to DVD. This was one of his major selling points, yet so far, that’s simply not the case. In fact, some of the content Steve Jobs showcased in the launch is no longer even available for rental. Clearly the studios still have all the control regarding what content they will make available for licensing to the Apple TV.

While Roku’s interface make not be as polished as the Apple TV, the Roku makes up for it with all the great content that’s available. Roku has channels for Netflix, Amazon Video On Demand, MLB.TV, UFC, Pandora, Flickr, Facebook Photos and Roku has just announced support for Hulu Plus coming later this year. Roku has more than 75 content channels and expects to have nearly 100 by the end of the year. Roku has an open SDK and as a result, has a lot of content partners working to bring more channels to Roku devices. Compare that to the Apple TV which today, has no SDK and doesn’t run any apps on the box. Some are speculating that the Apple TV will run apps in the future since internally it has 8GB of Flash storage, but none of that is happening today.

Airplay
One of the big features of the Apple TV that many think could be a game-changer is Airplay. The technology allows a user to start watching a video on an iPhone, iPod or iPad and then move that content over to the Apple TV in realtime. While Airplay looks promising, it won’t be released until November and there are still a lot of unanswered questions about how well it will work. For instance, you can move content from iOS devices to Apple TV, but you can’t move content from Apple TV back to iOS devices. Also, one has to wonder how well video streaming will work when you start watching a video encoded for a mobile device, but then want to transfer it back to a large screen. There is also the question of how DRM is going to work with Airplay and my guess is that only content in the H.264 or .MP4 format is going to work, which likely means only FairPlay will be supported. Airplay looks like interesting technology, especially for streaming music, but for video, there are a lot of unanswered questions. So before all the Apple fanboys take over the comments section saying just how groundbreaking Airplay is, we’ll have to wait and see how well it really works once it’s available in the market.

Netflix and Video Quality
While I’ve seen a couple of reviews saying that the quality of Netflix streaming looked better on the Apple TV when compared with other devices, personally, I don’t see it. Testing both the Apple TV and the Roku XDS on a 50″ Vizio plasma TV and a 42″ Samsung LCD TV, it was hard to notice any difference in quality. I felt like Netflix streaming started up just a but faster on the Roku, but really could not tell. The video quality on both devices seemed to be identical to me. What’s not identical on the devices is the Netflix application. The Netflix app is much better on Roku than it is on Apple TV. On the Apple TV, you have to choose the program before you get a description of the movie but Roku gives you description of the program on the first screen. There are a lot of little differences in the Netflix experience where Roku has the edge which should be expected since they have been refining the Netflix interface for their device over the past few years.

Conclusions
I’ve read a lot of reviews of the new Apple TV and many have described it as “a solidly built device” or said “it feels really solid”. While the Apple TV is well built and feels like a heavy hockey puck, that really has nothing whatsoever to do with how Apple TV performs as a streaming device. Others have said that Apple TV is best for those who “value design” yet for a streaming device, performance has to outweigh design. Not to mention, the new Roku XDS models are very slick, really small and in my opinion, very well designed themselves. You can have the nicest, most solid looking device on the market but if it can’t access the content you want, at the quality you want, then the design does not matter.

To me, Apple TV is really nothing more than a crippled iPod that you hook up to your TV. It depends on iTunes running on another device to feed content to it and Apple’s sole purpose with the device is to get you to rent more content. Some have suggested that the Apple TV will provide more value since the hacker community is already jailbreaking the Apple TV, but I would ask why some users always have to jailbreak Apple Products to make them work according to their needs?

While some want to suggest you buy a Boxee or Google TV instead, Apple TV and Roku aren’t trying to be a DVR-esque media hub. Boxee and Google TV are really going after a different kind of user and their products are 4-6x more expensive than the cheapest Roku box, which starts at only $59.99. So if you are interested in a Apple TV or Roku, don’t be put off by people who say you should wait until Google TV is out in the market. Google TV looks to be really cool and also has support for Netflix, but the device will cost close to $300 and serves a different purpose in the market.

After spending a lot of time with both the Apple TV and Roku XDS, I’d much rather have a Roku due to the flexibility with the hardware, the support for 1080p and the fact it gets a lot more content than the Apple TV. If I was trying to decide where to spend my $99, Roku would be the hands down winner in my book. If you have any questions on either device, put them in the comments section and I’ll try and answer them.

Note: I’m giving away both an Apple TV and a Roku XDS to a lucky reader of my blog. You can enter the Apple TV giveaway here and the Roku XDS giveaway here.

UPDATE: I see that some folks in the comments section are implying that I don’t like Apple products and that’s why I picked Roku. So to put that to rest, I should mention that I own a 13″ and 15″ MacBook Pro, an iPad, four iPods, two Airport base stations, and an old and new Apple TV. That’s over $5k in Apple gear. Oh, and did I mention I use to work for Apple as a certified technician back in the days? So I’m anything but an Apple hater.

I'm pleased to announce that on Wednesday Nov. 3rd, Jennifer Taylor, Senior Director at Adobe will kick off the second day of the Streaming Media West show with a keynote that will showcase Adobe’s latest end-to-end workflow solutions for streaming video and social media applications and include a demonstration of Flash running on mobile devices. You will also hear Adobe’s perspective about the evolving landscape for mobile and controversy surrounding HTML5, and how the Adobe Flash Platform fits in.

Jennifer joins Rishi Chandra, Product Lead for Google TV will be the keynote speaker on the first day of the Streaming Media West show, taking place November 2-3 in LA.

Keynotes at the Streaming Media West show are always free to attend. Simply register for a free exhibit pass and you're in! And if you want to register for a conference pass, you can do so using the promo code DRF1 and get $200 off the ticket price.

In July, AT&T signed a non-exclusive deal with Cotendo to integrate their application acceleration and dynamic site acceleration (DSA) services in with AT&T's network. While the news has not yet been announced, on Friday I spoke with AT&T about the deal and it is clear that AT&T plans to challenge Akamai in the market for these value add services.

For those not familiar with Cotendo, the private company launched in March of last year and in just over 18 months, have signed up more than 200 customers who use their dynamic site acceleration (DSA) and application acceleration services. Many of their customers are some of the biggest names on the net including Facebook, Answers.com, Digg and others.

When it comes to application acceleration services, Akamai has pretty much been the only game in town for customers looking for a non-hardware based solution. Yet as more content delivery networks begin to diversify their revenue and focus on what the industry calls "value add services", Akamai won't be the only vendor in the market that content owners can look to. I've written about this in the past, as recently as March of this year where I explained in a post entitled, "CDNs Will Challenge Akamai For Value Add Services", that Akamai won't rule the value add services market forever.

AT&T said that between 40-60% of all new customers in their sales pipeline either have an existing DSA capability or think they might need one and are including that as part of their vendor requirement. While Cotendo may not have 100% of the functionality that Akamai has for these services just yet, they don't need to. AT&T pretty much owns the enterprise market and when customers have a problem, the first place they go looking for a solution is their current vendor, just like it would be with Akamai customers. The result is that AT&T is going to be able to use the relationships they already have with large enterprise customers to solve the problem, without it simply being an RFP bidding process.

In the past 45 days, AT&T says the new Cotendo offering has allowed them to win business that they either had to walk away from in the past, or could not win since they had no DSA offering. As a result, they were losing all of the delivery business of that customer, not just the DSA component. So these new services not only allow AT&T to generate revenue from new product offerings, but also allow them to capture a larger portion of the overall content delivery business.

As a result of AT&T's partner mentality, they did the deal with Cotendo in July, implemented it six weeks later and already had major AT&T customers using the service in August. AT&T expects to be able to talk about some of these customers by name later this year. From the Cotendo customers I have spoken with, they love the service, the performance and the price. The hurdle facing Cotendo is that they don't have a big brand, lots of marketing dollars or a large sales channel, not to mention the ability to easily and quickly scale. But that's exactly what AT&T provides. AT&T now gives Cotendo a direct sales channel, access to AT&T's global network and the marketing clout of the AT&T name.

While I just wrote on my blog only two months ago that,"Akamai's CDN Business Looks Solid, Threat To Value Add Services Far Off", we're going to start seeing pricing pressure in the market for these services sooner than I thought. When asked, AT&T said they could charge customers 50% less than what Akamai charges today and AT&T would still be "extremely happy" with their margins. Of course, I'm not predicting doom-and-gloom for Akamai here; AT&T still has to prove themselves in the market. But make no mistake, pricing for these services will come down in the market and Akamai won't be the only vendor with value add solutions that will solve customers problems. I think we're going to start to see this impact in a noticeable way within the second half of next year.

Of course, I would not be surprised if I got more than a few comments from Akamai shareholders saying that there is no way that AT&T can compete with Akamai for value add services because Akamai is so far ahead of their competitors. While that may be true now, it won't take years for competitors to close that gap. We've seen this play out in the past with video delivery and these additional services are no different. Many years ago, Akamai was the only game in town for large-scale video delivery. They owned the market and could dictate the going rate for pricing. But after a few years, Limelight and Level 3 in particular became serious competitors and forced Akamai to have to reduce their pricing for video delivery. Limelight and Level 3 drove pricing down across the market.

This is the thing to watch with the value add service component of Akamai's business. Even if companies compete with Akamai for only a portion of their value add service business and don't take a lot of market share, they will drive pricing down for these services. While I didn't expect this to happen for some time, AT&T's deal with Cotendo will speed this up due to AT&T not taking the strategy of not having to build everything in-house. Partnering with a specialist like Cotendo, who's already been out in the market for eighteen months with these offerings allows AT&T to come to the market really fast.

For AT&T, it appears as if they are becoming a lot more smarter on how they approach the market, the rate at which they roll out services and the mentality that even though they are a telco, they don't have to build everything themselves. This would be a welcomed change in strategy for the company and something they should see some immediate benefits from.

Related Posts:

– A Detailed Look At Akamai's Application Delivery Product – Part 1

– Overview Of Akamai's Application Delivery Customers – Part 2

– CDNs Will Challenge Akamai For Value Add Services: CDNetworks The Latest

– CDN Cotendo Raises $12M, Has 120 Customers For DSA and App Delivery

– Akamai's CDN Business Looks Solid, Threat To Value Add Services Far Off

In June, Microsoft and ESPN announced a deal to bring over 3,500 live events a year to Xbox LIVE gold members via the Xbox 360 console. For the past week I've been testing the offering on my Xbox and overall, it's a pretty nice service. Content includes both live and on-demand videos of college basketball, college football, soccer, MLB, NBA, tennis tournaments and golf majors amongst others.

The videos are the same ones you get from ESPN3.com providing your ISP has cut a licensing deal with ESPN. (Here is a list of all the current ISPs that have a license with ESPN) The quality of both live and on-demand content looks good on a 50" screen and maxes out at 720p. Buffering on my FiOS connection is very quick and live events start within a second. In addition to the live events, ESPN has a ton of on-demand content including shows like SportsCenter.

The ESPN offering is part of a new dashboard upgrade for the Xbox which also includes an improved Netflix streaming app and a lot more
movies and TV shows available for rental via the Zune video channel.

Overall, the quality and selection of the content with ESPN is pretty good. The one thing I like about the offering is that it allows you to get content to your TV that's only available online, without having to use your computer or connect it to your TV. Microsoft isn't giving out the exact date when the new dashboard update with ESPN will launch, but did say it will be available just prior to Kinect being available, which is only about a month away.

I didn't have time to film the new Netflix functionality in the new dashboard, but you can check out a video of it over at Joystiq.

FedEx delivered my Apple TV's bright and early this morning and he's a few shots me unboxing one of the units. Later today I'll have a review up comparing Apple TV to Roku and I'll also be opening up a drawing and giving away an Apple TV to one lucky reader of my blog. If you're interested in a Roku, I'm giving away one of their new XDS units right here.

Today, just about any company involved or associated with streaming movies or TV shows over the Internet seems to have evaluations that we haven't seen in quite a few years. Companies like Netflix, Apple, Akamai and others have share prices that seem to be based more on excitement, rather than basic business fundamentals. While there is nothing wrong with being excited about what's taking place in the market and the growth we are seeing in digital content consumption, many have now set expectations for these companies that simply can't be achieved.

I do a lot of calls with institutional money managers on the buy and sell side and lately, far too many of them are getting all caught up with the idea that online video is going to somehow replace cable, DVDs, or other forms of media. The fact is that today, digital content offerings from the likes of Hulu, Netflix, Apple and Amazon are a compliment to traditional media. There is no doubt that digital is growing, but online video is not replacing cable and streaming movies are not replacing DVDs today, or any time soon. Seismic shifts like that don't happen overnight or over a few years but rather usually over a long period of time, measured by a decade or more. To put it in perspective, Netflix has only been streaming for three years and while they have been the hands down leader, DVDs and cable TV are still around in volume.

When you look at the kind of money Netflix is spending to license content for digital, there is no way to run the numbers to show that Netflix can possibly sign up enough new subscribers over the next five years to cover their $1B licensing deal with EPIX. Yet in the past six months Netflix's stock has gone from $74 to $165 a share simply due to excitement. Financial analysts seem to be asking more about the rate of growth rather than how these services work, what the quality looks like, what devices they work on and what the business model looks like. I am amazed at how many financial analyst pieces I read where the author talks about a particular streaming service yet admits they have never used it. How can they possibly have tens of millions of dollars tied up in a company yet haven't spent $99 to buy a box and actually use the service for themselves?

I see a lot of investors making decisions based on three to five year projections of the size or growth of the industry while ignoring the reality in today's market. I keep hearing about devices, yet 95% of the time when I ask someone on Wall Street how many Roku's, TiVo's or broadband enabled TVs have been sold, they have no clue. How is that possible? How can you track or invest companies in this space who's sole growth is dependent on these devices yet not know how many have been sold, how they work or what the service looks like?

The last thing we need is another
bubble, yet I'm afraid that what we currently have. I keep hearing or
reading things that imply that the ad dollars from TV are flowing to
online. Online video advertising is absolutely growing, but lets keep things in
perspective. Last yet
the online video advertising market was around $500M, the broadcast TV
ad market was $60B. One is not putting the other out of business. And while digital video consumption is growing, it's not growing as fast as some may think. NPD just released numbers stating that 75% of all U.S. consumers did not
stream or download any multimedia content of any kind in the past three
months. That's the kind of data we need more of in the market to keep things in perspective.

Now I'm sure some are going to comment that I'm always negative or I
always have to try and ruin someone's high but the fact is that setting
the proper expectations is crucial in the long term
success and growth of any industry which is all I care about. I'm not in this for the short-term and I don't play stocks. I've been in this industry for
fifteen years and I want to be in it for another fifteen more. But in order for
that to happen, the market needs to evolve into services that can
become profitable and sustainable on real profits, not hype or future projections. Just take a look at how many companies in this space
are actually profitable today. Very, very few. To help them get there we
need sensible, rational thinking with expectations they can meet. Not
evaluations based on wild projections and statements about one service
killing off and replacing another.

I hate to say it, but the current bubble we are in is not going to be able to last much longer. Some of these companies are going to have to get knocked down and many on Wall Street are going to have to come back to reality. We need more folks looking at the core fundamentals of what companies have to offer as opposed to that day trader mentality which is simply trying to figure out if a stock will go up or down the next day.

Disclaimer: I have never bought, sold or traded a single share of stock in any public company ever.