[opendtv] The man who gave us the DVR says Roku is the future of TV - MarketWatch
- From: Craig Birkmaier <brewmastercraig@xxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 08 Nov 2017 08:21:11 -0500
“We built the first DVR with a team of five engineers in a year, so it’s not
hard.”
Duh!
I wrote about how easy it would be to build a DVR in 1992. I hung out with the
folks who started TiVo a few years later...
What took so long?
As always, it was the threats of lawsuits (and actual lawsuits), then the
acceptance of a new technology by those that opposed it, when they figured out
how to make money with it.
Can you say VHS?
Regards
Craig
https://www.marketwatch.com/story/the-man-who-gave-us-the-dvr-says-roku-is-the-future-of-tv-2017-11-07
The man who gave us the DVR says Roku is the future of TV
Therese Poletti
Anthony Wood has spent his career changing how we watch television, and says he
has always had one goal: Offer a single destination for video.
“The opportunity here was what I had always wanted to do, which was to build a
platform for TV,” Wood said recently of Roku Inc. the company he incubated at
Netflix Inc. when streaming-media was still more theory than practice.
Roku went public last month widely known for its hardware, small boxes that
allow access to a variety of streaming-video services. At the Los Gatos,
California, headquarters building that Roku leases from Netflix Wood preaches
that the key to the company’s future is not the box, but the unified viewing
experience it provides in a media environment splintered into scores of
different apps.
He should know. Wood already invented a box—the digital video recorder. In
1999, his DVR startup ReplayTV won “Best in Show” at the Consumer Electronics
Show over a rival named TiVo. But ReplayTV’s ability to completely skip
commercials ultimately led to debilitating lawsuits from broadcasters, while
TiVo’s decision to only allow fast-forwarding gave it a freer path to an
initial public offering before the dot-com crash.
In fact, it was TiVo’s IPO in 1999, before it actually released a product, that
gave it the ammunition needed to take out ReplayTV, Wood now says.
“They were actually only possible at the price points they came out at because
that was the dot-com boom and they were being subsidized by selling stock,”
Wood said. “TiVo started it, that was their real innovation. They came after
us, but they sold at a very low price, they subsidized based on raising a lot
of money.”
What investors - and everyone else - get wrong about innovation
Wood sold ReplayTV to DirecTV, as cable providers like DirecTV owner AT&T Inc.
gave up their fight against the DVR and instead started to incorporate the
feature into their own offerings. TiVo, which once had a peak valuation of
about $6.5 billion in 2010, sold for $1.1 billion last year to the former Rovi
Corp. where the trove of patents that it licenses to providers are more
important than its hardware.
“DVRs are a feature,” Wood said. “That’s why the best-selling DVRs are not made
by TiVo or by my company Roku, they are made by the cable operators, it’s a
pretty straight forward feature to add…We built the first DVR with a team of
five engineers in a year, so it’s not hard.”
That lesson was instilled in Wood as he began to develop a device to stream
content to televisions with Netflix in a secret initiative called Project
Griffin, after a character from the movie “The Player.” After starting
Roku—named for the No. 6 in Japanese, as it was Wood’s sixth startup—in 2002
with a focus on products like digital commercial signs, Wood began working with
Netflix Chief Executive Reed Hastings as Hastings was transforming Netflix to
online video delivery from a DVD-by-mail business.
Wood had two jobs, developing a streaming device at Netflix, which declined to
comment for this article, and running the original Roku business. Then,
Hastings made the decision to integrate Netflix into TV sets in a more agnostic
fashion, and Roku was truly born.
“Right when Griffin was going to ship, and I think it was [after Netflix
signed] the LG deal, and that was looking like a much more scalable way to
acquire customers…[Hastings] made the decision ‘We’ll just integrate Netflix
into other stuff, why doesn't Roku just ship the Project Griffin?’” Wood said.
Wood quickly spun out Roku’s original business into a private company called
BrightSign, “and then Roku focused solely on building a streaming player with
Netflix as the foundation,” he said.
With venture funding, Roku doubled in revenue in 2011 to hit $100 million
through hardware sales, but in more recent years, the company has started to
transform into the business Wood believes will actually be the future. Revenue
from the platform nearly matched hardware sales in the second quarter, and Wood
believes money derived from the streaming operating system, content licenses
and advertising will eventually be the majority.
RBC Capital Markets analyst Mark Mahaney believes that shift will happen next
year, and he estimates that advertising revenue by itself will account for
about half of Roku’s revenue by 2019.
“This is Roku’s fastest-growing, highest margin segment,” Mahaney said.
Roku advertises on the platform, and last month launched the Roku Channel, a
movie channel on its platform supported by ad sales. Offering its own streaming
content, though, could risk alienating Roku’s long-term content
partners—Hastings, after all, avoided a similar move by not releasing the Roku
hardware under the Netflix umbrella.
How we got here: A history of the use of tech in toys
“This starts to bring them into competition with some of the providers on their
own boxes, they have not done this in the past,” Colin Dixon, an analyst with
nScreen Media, said. “I talk to small providers all the time and one of the
things they value about Roku is that it is neutral.”
Wood counters that Roku needs free content to draw viewers who could then sign
up for subscription services they discover through the platform. He said that
the free category is the most popular on Roku, popular with cord-cutters who
are looking to save money away from the cable bundle, and that the Roku Channel
is a way to help people find content offered by those free services.
“There are 5,000 apps on Roku,” he said. “The Roku Channel is a way to
merchandise and promote content that’s already on our platform.”
The Roku Channel could be destined for a life beyond the Roku boxes as well.
Variety reported after MarketWatch’s interview with Wood that Roku is looking
at streaming content through its mobile app, which is now mostly used to
control Roku devices from smartphones running Apple Inc.’s iOS or Alphabet
Inc.’s Android operating system. Roku declined to comment on the report.
Establishing an app that streams content could put Roku in the crosshairs of
some of the biggest and most powerful companies in technology, but Wood doesn’t
seem scared by that notion. In fact, he sees Roku as a true competitor to the
large tech companies that have long looked to conquer the biggest screen in
your home.
“My philosophy is that our goal is to build the operating system for TV, that
is the long term goal, it is like Android or Windows, we want all TVs in the
world to run our platform,” Wood said. ”If we do that, the stock will be worth
a lot of money.”
MarketWatch staff writers Jeremy C. Owens and Max A. Cherney contributed to
this article.
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