CEO: Roku's future is TV's future (Q&A)

As Amazon enters the streaming-video device market today, Anthony Wood -- inventor of the DVR and founder and CEO of Roku -- already sees boxes and dongles as stepping stones to TV’s ultimate future.

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Roku CEO Anthony Wood Joan Solsman/CNET

The day a while back that Apple TV's $99 box launched, Roku founder and Chief Executive Anthony Wood says that Roku sales doubled. But as Amazon enters the market today with its own $99 streaming-video device called Fire TV, Wood says he's now looking beyond boxes.

By some measures, Roku is the dominant streaming-video box in the US. While Apple TV may have helped Wood and his 14-year-old company ship more units, Roku executives never miss the opportunity to cite outside stats that show Roku is more commonly used than Apple and streams more hours per box than Apple.

As Netflix and YouTube put video streaming into day-to-day lives, competition among streaming-media boxes has grown from the two-horse race -- Apple TV versus Roku -- to include Google's Chromecast launched last year. And now consumers have to factor in Amazon Fire TV, not to mention growing shipments of smart TVs that connect to the Internet.

What story do the numbers tell at this juncture? Apple said last year that to that point it had sold 13 million Apple TV boxes. Roku, meanwhile, had sold 8 million of its devices as of early this year. As for market share, researcher Parks Associates says that there's a significant amount of overlap in ownership -- that, for instance, most of those with a Google Chromecast own another kind of streaming media device. Parks breaks things down by looking at most-used device, which shakes out this way: Roku (56 percent), Apple TV (23 percent), Chromecast (10 percent), and other devices (11 percent).

CNET's live coverage of Amazon's April 2 event

But Wood is already looking past this bloating competitive field. The way he sees it, only one or two companies will endure in this contest, which ultimately won't be decided by the best box. Wood's goal is to "operating system on every TV that ships."

Wood spoke with CNET about preferential treatment to competitors that confounds him, why the streaming box isn't going to disappear, and the future of TV. The following is an edited Q&A.

Q: How does Roku define itself?
Anthony Wood: We're a platform company, an operating system for the big screen. We started distributing our platform through our boxes and that continues to be a business that grows for us: We've shipped more than 8 million boxes in the United States, and last year streaming hours grew 70% from a billion hours to 1.7 billion hours. I often get asked do you think the box business is going away, and I don't think so. I think it's going to keep growing for many many years.

Q: People ask you if the box business is going away? Considering how many players are jumping into this space, that surprises me. I guess because of things like your partnership with TV manufacturers TCL and Hisense to integrate Roku streaming right into their televisions.
Wood: And SmartTVs. Hisense and TCL, those will start shipping this fall in September, and there's a pipeline of other original equipment manufacturers. It''s a huge opportunity to bring a common platform to the SmartTV world, where there is a lot of fragmentation, a lot of platforms are not getting enough support from the content companies. People are going to be surprised how quickly consolidation happens in that business. Just like Windows and Apple are the platforms for computers and iOS and Android are the platforms for mobile, there will be similiar consolidation in platforms for TV and it will be Roku. It's the leading independent platform.

Q: Are you looking past the perception of your competition as being just people coming out with boxes?
Wood: Wow, a chance to talk about competition. Generally there are bigger companies that keep coming at this market, and we've been competing with Apple for six years now. But every year, our sales grow, and it's because we are just maniacally focused on streaming. That's all we do. We have to get the best reviews, the best value, the most content. People who are not completely tied to the Apple ecosystem, they will pick our product because it's a better product. Google, we've been competing with them for several years now, they launched several versions of Google TV, Chromecast was shipping in the fourth quarter of last year. We had really strong growth last year, revenues grew in the fourth quarter 60 percent year-over-year. So I think we've shown that we can compete, and the fact that these companies keep trying, it's because streaming is the way people watch TV, it's the future. It's the future of all TV.

Q: The concept of streaming being the future of TV, can the internet handle that? If video already eats up so much of the Internet's peak traffic, can the Internet handle a Web TV service, can it handle a lot of households using Roku for all their video needs?
Wood: I think it can. But this is an area where my answer is a little bit of a cop out. I just know that there are big companies and all they do is work and sell internet infrastructure. They make their living on making the Internet faster, and look at the dramatic rise in things like YouTube video streaming and Netflix video streaming. Already the amount of growth is huge, and the Internet has handled it no problem. We have operator apps, like the Time Warner Cable app, and we have discussed with operators -- if everyone switched to using an app instead of a cable box, could your network handle that? And the answer generally has been 'If that happened overnight, that would be a problem, but it's not going to happen overnight.' They have enough bandwidth, they just would have to reallocate. Also the technology of the Internet keeps getting faster. I don't think the Internet is going to break.

Q: At least not all at once.
Wood: Not suddenly. Now tomorrow, if it's all broken, I'll have cancel my Netflix.

The Roku.
Sarah Tew/CNET

Q: On the topic of Netflix, CEO Reed Hastings recently promoted this idea that he wants to broaden the idea of Net Neutrality to extend to content providers like him so they don't have to pay for the parts of the delivery. What your attitude is toward Net Neutrality?
Wood: I believe in competition. But really, I probably shouldn't be talking about it because our business relies on streaming and those deals will get worked out one way or another. I do think, one area that does affect us is, and it's not directly the official definition of Net Neutrality, but just this idea of the authentication, the authenticated channels. Do operators treat different platforms equally or do they discriminate against one versus another? In some cases, for example, operators will authenticate HBO Go on iPad but not on a Roku player. Like in the case of Comcast, they authenticate HBO GO on Apple TV but not on a Roku. And to me that doesn't seem particularly fair.

Q: Why do those situations arise?
Wood: They have this instinct to preferentially treat their boxes versus their partner boxes.

Q: OK, but in the example you just gave, HBO Go being authenticated on an iPad or Apple TV but not on a Roku, Comcast doesn't have a stake in Apple. Apple isn't a Comcast company.
Wood: You're right. It's strange. It's strange that they do that.

Q: You don't know why?
Wood: I could speculate. I don't know exactly.

Q: Very early in your existence, Roku was referred to as a "cable killer." And you laugh at that, I'm curious if that perception was ever been true to what Roku's ambitions were or if that bears out today.
Wood: Our ambition is to be the operating system for TV. And Internet-delivered television makes that possible. There's only going to be one or two winners. Customers now have a lot of choice, they can use the app, they can get their TV just from their local cable operator, they can get TV from Netflix if they want. So some people will end their pay TV relationship, some people might sign up for more packages.

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CNET
This is a big change for cable operators. They're not used to competition. It's ironic though, we have very strong data that if you're, let's say, an HBO subscriber, and if you have HBO Go on your Roku, then you use it a lot. If you don't have HBO Go, you just use more Netflix. So, by not authenticating HBO Go, they're just encouraging customers to use Netflix. At least customers have that option.

Q: I want to step back and look at given your history with inventing the DVR and launching Roku, I'm curious about what your perspective is on the digital media world that we live in today, what has happened that you didn't expect to ever occur and what have we failed to reach that you anticipated would be here already?
Wood: I always viewed the DVR as a stepping-stone product, until we got to the world where everything is available on demand. And that's progressing pretty much as one assumed it would. I guess what surprised me the most was probably how fast cable operators did react, the whole authenticated content had some stops and starts but generally it's moving forward well. It's good for consumers, it's good for operators. I was surprised how, by Time Warner Cable putting its entire lineup as an app on Roku, that shocked me.

Q: What is the reason for that momentum?
Wood: Netflix. I mean, they really created a competitive environment. Forcing everyone to compete.

Q: So, six years of consumers using Roku -- six years from now, what's Roku going to look like?
Wood: I think we'll be the operating system on every TV that ships.

Q: And how are you going to get there?
Wood: We're going to keep doing what we're doing.


Update 11:34 a.m. PT:Added links to coverage of the new Amazon Fire TV, and added sales and usage numbers for Roku, Apple TV, and Chromecast.

 

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