H.265 is the latest *industry standard*. It's unlikely Apple will support Google's VP9. I think that's good. We don't need another Flash wannabe from taking hold.
I've had little experience with other TV dongles like Chromecast or FireTV, but I do have a friend with a Roku, and I'm not sure if it's the Roku or his TV, but the quality pales in comparison to my AppleTV 4.
I don't see AppleTV as a competitor to low-end media sticks, I think it's more comparable to a X-Box or Playstation. I have tons on game apps installed on ours, not to mention some other cool apps, and 2 (wireless!) game controllers as well. I love the decent (I know, not super high end, but good enough) gaming it provides in addition to all the media options from iTunes, Netflix, YouTube, etc. plus my own media server.
AppleTV is the simplest, good quality, most cost effective, single device entertainment center for the living room in existence. Can Apple improve it? Absolutely, if they'll start taking it seriously. AppleTV may be the "best" device out there, by a slim margin, but it's not Insanely Great yet.