Roku CEO: $60 Million Infusion Will Build 'Operating System for Televisions'

2:03 PM PST 05/29/2013 by Alex Ben Block
Anthony Wood with a Roku

UPDATED: The new investment from BSkyB, News Corp. and Hearst is earmarked for a push away from the streaming box and into services like promoting channels, the company's chief executive tells THR.

The TV streaming platform Roku says the $60 million investment it just received will help it move past a box that streams content from the Internet, and into the development of software built into TVs with services that help attract viewership.

“We see a huge opportunity to be an operating system for televisions and that’s what were focused on right now,” Anthony Wood, ceo of Roku, told The Hollywood Reporter.

The latest round of funding brings the money raised to date by Roku to about $140 million, from venture capitalists and strategic investors. The most recent infusion came from two existing investors – British Sky Broadcasting and News Corp. – as well as two new investors, Hearst Corp. and an institutional investor the company declined to name. The web site All Things D reported that investor as the Fidelity funds.

RELATED: BSkyB Puts $1.9 Million More into Roku

“Roku has built a strong brand that is widely recognized for great technology and a broad selection of high-quality content,” said Ken Bronfin, senior managing director at Hearst Ventures, a unit of Hearst Corporation. “We are truly impressed that Roku has built such a unique position in the market and we look forward to working with them to develop innovative products and services for our television audiences.”

Other venture investors include Menlo Investors and Globespan Partners.

Strategic partners also include Dish. BSB and News Corp. became investors last year. “One of our goals,” said Wood, “is to align ourselves with large companies that can really help our business."

Roku currently sells four versions of its streaming video players for $49 to $99 each. The most recent is the Roku 3, which like its predecessors makes online entertainment, movie, news and information channels easy to watch on a TV set. This includes hundreds of no-cost channels, plus access to subscription services like Netflix -- which, along with Amazon Instant Video, Pandora (the music service) and Sony’s Crackle, are among the post popular channels on the device.

The Roku 3 is currently among the top five best selling electronic devices on Amazon.com. The company estimates its users streamed more than a billion hours of video and music in 2012.

RELATED: Roku Content GM Outlines Company's Future

One of Roku’s new revenue streams comes from the electronic rental and sale of movies. Each time a viewer completes a transaction through the device, the company gets a cut. Roku’s other big initiative is services, which means not only carrying channels but also promoting them. In return, the company gets a fee.

Roku has sold more than five million boxes in the U.S. as of the end of last year. The company, which recorded 2012 sales of $140 million, started in 2003 and marketed its first players in 2008.

Wood, who was the founder and first investor in the Silicon Valley start up, worked on the first DVRs, helped create the DreamWeaver software offered by Adobe and was founder of Replay.

In its next phase, Roku is working with about two dozen OEM’s (original equipment makers) that will allow smart TVs to work with Roku, especially the Streaming Stick, a device the size of a USB plug which is inserted into the TV. Some sets will come bundled with the Stick.  The company says that there will be 3.5 million devices certified to work with Roku available  by the end of this year.

Roku is also working with about two dozen TV manufacturers and in the future plans to have Roku software built into TV sets. Many of those are house brand TVs like Insignia, which is sold by stores like Best Buy.

Roku works closely with many cable companies, including Time Warner Cable, which provides customers an app that can be used to watch their service via the Roku box. However, for some customers, Roku is an alternative to cable. Wood said the top 25 percent of users stream an average of 35 hours of programming a week. He admits for many of them, “that is all they need.”

 

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