Roku CEO Anthony Wood shared company updates and his views on the broader video market in an interview with me at NATPE in Miami Beach on Monday. 2013 was a strong year for the company with 8 million cumulative units sold to date (about 3 million in 2013). Roku delivered 1.7 billion hours of video in 2013.
Interestingly, Anthony said that sales accelerated when Chromecast was introduced. He cited the trio of Roku, Apple TV and Chromecast as now dominating the connected TV device space, each with a relatively well-defined prospective customer.
At CES, Roku unveiled the first of its "Roku TV" deals with Chinese manufacturers Hisense and TCL. Though their share of the U.S. market is still relatively small, Anthony sees them growing rapidly, as they displace Korean manufacturers the same way the Koreans displaced the Japanese in the past. This would make Roku TV a more prominent part of the U.S. TV landscape.
The Chinese manufacturers are just the start for Roku TV; Anthony alluded to further deals to be announced in 2014, including with tier 1 players, except Samsung, which he believes has too large an investment in their own Smart TVs to partner with Roku.
For all other TV manufacturers though, Roku has positioned itself as a valuable partner, bringing along the pre-integrated 1,200 channels+, a solid UI and brand name. One thing that's not included in Roku TV is seamless integration with pay-TV operators' set-top boxes. Citing Google TV's stumble, Anthony sees too much complexity in these integrations to make them worthwhile for now.
More interesting to Roku is to replace the set-top box entirely, the direction it took with the last year's deal with Time Warner Cable to deliver the TWC TV app. In fact, Anthony believes Roku has a big opportunity to subsume pay-TV functionality in its devices, eliminating the set-top box altogether. He thinks it's way too complicated for app developers to deal with all the different pay-TV providers, who themselves aren't equipped to handle thousands of app integrations. Conversely, Roku has built a well-oiled machine for on-boarding and promoting new apps.
While that value could be appealing for many operators, I pointed out that a number of the larger ones (e.g. Comcast, DISH, Verizon with its OnCue purchase, others) are investing heavily in their own next-gen set-tops and are unlikely to play ball with Roku. Just yesterday, in reporting that it gained video subscribers for the first time in over 6 years, Comcast noted the contribution of its X1 set-top. Pushing back, Anthony thinks even these companies will eventually backtrack on their own set-top box development and embrace partnerships.
It's no surprise Netflix still contributes the largest share of viewing through Roku, though other content providers are gaining in time spent. Roku also has transactional and advertising revenues, though Anthony noted device sales still dominate.
Last but not least, I observed that Roku has succeeded in a field of giant competitors (e.g Google, Apple, Microsoft, Sony, Amazon soon, etc.). Anthony attributes this to being focused, lean and ecosystem-friendly.
NATPE video-recorded the session and as soon as I have it I'll update this post. Lots more details.