Six Questions: Roku’s Anthony Wood

22 Jan, 2010 By: Erik Gruenwedel

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Set-top box manufacturer Roku is aggressively positioning itself as entertainment aggregator for third-party content holders, including Major League Baseball.

Founded by Anthony Wood, who launched digital video recording service Replay TV, and once headed Netflix’s digital efforts, the privately held Roku continues to sell thousands of media players, generating 220% year-over-year unit shipment increases, according to Ralph Schackart, analyst with William Blair & Co. in Chicago.

Richard Doherty, director of The Envisioneering Group in New York, considers the Roku player one of the most consumer-friendly and technologically progressive CE devices launched in recent years.

Home Media Magazine caught up with Wood to pick his brain on keeping Roku on the cutting edge.

HM: As a first mover delivering Netflix movie streams from the Internet into the home, how is Roku evolving to remain competitive in the rapidly changing streaming space?

Wood: When we released our first box, it cost $115 with shipping and had one channel, and that was Netflix movie streaming in standard-definition. Then we added, via free software updates to our customers, Netflix in high-def, Amazon VOD in HD, MLB.com and now a channel store with about 15 [free and premium] channels.

What’s going to happen in the next couple of years is more of that, and we expect to have hundreds of content channels by the end of this year. The trend in our industry is that hardware prices continue to drop and content becomes key. Content per dollar spent is becoming very important to us.

HM: Vudu just announced it would stop being a set-top box supplier and instead market its movie/TV software as an app to CE manufacturers. Is a Roku app far behind?

Wood: You mean get the Roku channel store without having the box? No. We are pretty clear about our business model, putting together a complete solution and making sure all the pieces [hardware and software] work well together. The issue with Vudu was that their hardware was very expensive and they only had one channel, which was Vudu movies, so it just wasn’t a good value proposition.

In our case we sell a lot of boxes. We sell many hundreds of thousands of units. So our model works well for us. It’s a little bit like Apple in a sense that it’s an open app store. So we are moving up the value chain from being just a reseller of boxes to being more like a virtual MSO [multiservice operator]. That’s how we see our business evolving.

HM: Will Internet TV delivery be integrated into other devices, eliminating a market for stand-alone set-top boxes? 

Wood: No, I don’t think so. Of course it also depends on what you mean by set-top box. Do you mean DVD players? It can be an open-ended question. But the number of set-tops connected to your TV hasn’t slowed.

HM: Will we see new-release Hollywood movies available through the Roku box, considering Netflix streams are largely catalog fare?

Wood: Five years from now you will be able to get everything you can get on the Internet plus everything you can get on cable and satellite through Internet-connected TV devices.

HM: Is pay-per-view and video-on-demand or ad-supported content the future for home entertainment?
 
Wood: All of the above will be available over the Internet over devices such as ours. Today we have subscription, pay-per-view and ad-supported free content. We just don’t have ABC.com or Hulu. I can’t say when we will have [network] content [and if it will] be just through Hulu or individual channels. Free ad-supported TV is a big part of the market, and their online channels are going to come at some point.

HM: 3D television was a common theme at the Consumer Electronics Show earlier this month. But isn’t the probability of 3D diminished somewhat by the fact that nearly 50% of U.S. homes have just an HDTV?

Wood: DirecTV first introduced HD content in 1997. Then three years ago they went from one HD channel to a bunch of HD channels. And now it is really mainstream. So if you look at HD adoption as an example, it took a really long time. And I think 3D could have the same timeline. But it will come — there will be 3D movies released later this year on Blu-ray Disc, and ESPN announced a 3D channel. It’s definitely coming. It just reminds me of the early days of HD.

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