Connecting with… Roku's Anthony Wood
Q&A: Roku happy going direct to consumers
By Danny King -- Video Business, 10/16/2009
OCT. 16 | Q&A: Amid a home entertainment industry in which companies are broadening their array of products to cope with the growing digitalization of the business, closely held Roku keeps it relatively simple—it’s a hardware company with a handful of content partners that sells its products directly to its customers. Founder and CEO Anthony Wood, 43, developed Roku while working for Netflix about seven years ago, before breaking off the company on its own. (Netflix remains a minority investor.) Launched in May 2008, Roku’s $99 set-top box gives customers access to more than 60,000 digital titles because of agreements the company reached with Netflix and Amazon.com. Roku is profitable because of growth in set-top box sales. Roku has sold “multi-hundreds of thousands,” according to Wood, though he wouldn’t be more specific about financials. Roku also keeps expenses down by selling its product strictly online, avoiding signing on retailers.
Wood
VB: Who do you consider your competition?
Wood: Somebody like Vudu, but Vudu’s more of a movie service. And they’ve said they’re going to phase out their set-top box. There’s Apple TV—it’s not an open system, but they are Apple. It could be traditional cable and satellite, but our customers tend to have cable and satellite as well, so we tend to be complementary.
The other big ones are the game consoles. If someone owns an Xbox, they can use it [to videostream Netflix’s digital titles,] so in that way, it’s a competitor. There’s a portion of the market that will be a game-console customer, but that’s not for everyone. There are multiple TVs in most households, and, generally, there’s only one game console.
VB: Would you consider selling your hardware through a retailer?
Wood: We make margins on hardware, and we are profitable based on that. … [Our customers] are usually customers of one of our content partners, so for us, direct works really well. We have no plans to go through a retailer.
VB: More television makers are building components allowing for Internet connection within new TV sets. Is there concern that Roku boxes might become obsolete as more people have connectable TVs?
Wood: A lot of people just bought HDTVs, and they’re not connected. We do three to four software updates a year for Netflix and Amazon. The space is evolving very rapidly. If people can get a $99 set-top box and can get it updated all of the time, it’s a better experience.
VB: Do you think the growth of digital titles is substantially eating away at DVD sales?
Wood: I think the recession is hurting DVD sales. I think Blu-ray is also hurting DVD sales. You’re probably not buying DVDs because you’re waiting for the Blu-ray version. You’re sort of stuck.
VB: What’s your opinion on the battle between studios looking to enforce later DVD release windows for kiosks and Redbox?
Wood: Studios have a business that requires that, with each window, the price comes down. So the 99¢ rental is a difficult value proposition. I could see why the studios would want a later window, and I think that’s reasonable, but in the U.S., you can’t enforce that.
