Roku CEO Not Worried About Usage Caps
Internet Set-Top Maker Looks to Add More Channels, Retail Distribution in 2011
By Todd Spangler -- Multichannel News, 12/27/2010 2:58:24 PM
Roku CEO Anthony Wood isn't concerned that broadband service providers will introduce usage-based pricing or unreasonable bandwidth caps, which could discourage people from buying his company's Internet set-tops.
"What we see from a practical point of view in the marketplace is that there's enough competition from cable, telcos and wireless so that in every market there's an unlimited option -- and the price is competitive," he said in an interview last week with Multichannel News.
Roku CEO Anthony Wood
Added Wood, "We don't see a future where consumers will not be able to stream video over the Internet."
Roku sold the first devices that let Netflix subscribers stream video directly to their TV sets. The company's set-tops now offer access to content from more than 100 partners, including Hulu Plus, Major League Baseball, the National Hockey League, Amazon On Demand and Pandora.
The Federal Communications Commission last week voted to adopt "network neutrality" rules that, while they prohibit ISPs from blocking or degrading access to specific content or applications, leave the door open for usage-based pricing.
Wood maintained that he doesn't anticipate broadband providers moving to pricing plans that could make it more expensive for Roku's users to watch Internet video. He noted that DVD-quality streaming video consumes less than 1 Gigabyte per hour.
"Unlimited [broadband] sells," he said. "It's just a good marketing strategy."
To date, privately held Roku has sold about 1 million set-tops, with 2010 revenue of more than $50 million. "Sales growth is strong," Wood said. "Our sales [for 2010] are probably double last year, and we expect that to continue next year."
Roku clearly is facing some formidable competitors -- including Apple, which last week announced its redesigned Apple TV box had surpassed 1 million unit sales in about three months. Wood, however, claims Roku's sales have increased since the recent introduction of Apple TV, which supports Netflix streaming.
"We're not trying to go after the hard-core Apple fan," Wood said. "We're trying to go after everyone else."
In 2011, Wood said, Roku will add even more content partners, including those offering local content, and will introduce a billing service for selling content for a one-time fee or on a subscription basis like Apple's iTunes Store.
"There's definitely a shift toward more and more content companies seeing this as a revenue opportunity," Wood said. "The content guys used to laugh at us. Now they say, ‘Maybe next year.'"
Roku also intends to expand its retail distribution. "Until now we've sold almost all online. It's pretty clear that retail is one of the main places people are buying these products," Wood said.
While access to Netflix's instant-streaming feature is still the main reason people buy a Roku, more than half the company's customers say they buy it because of other channels as well, according to Wood. As for "cord-cutting," about 12% of Roku customers say they have canceled cable or satellite TV after buying the set-top while another 12% said they reduced their service level.
Wood personally said he still subscribes to cable TV "but to be honest I don't use it very much," watching most movies and TV shows via Roku. The last big event he watched on cable was the 2010 World Cup on ESPN. On the other hand, he upgraded his broadband connection from Comcast to a higher-speed tier to take advantage of the Roku box.
The company offers three set-top models: HD ($60), which delivers up to 720p video; XD ($80), which adds support for up to 1080p and 802.11n Wi-Fi; and the XDS ($100), which offers dual-band 802.11n and component video and optical audio outputs.
Roku raised $24 million from investors including Wood, Netflix and venture-capital firm Menlo Ventures, although Netflix has since sold its stake to Menlo. The Saratoga, Calif.-based company has about 100 employees.
Wood has been the CEO since Roku was founded in 2002. In 2007, Netflix hired him to head up development of an Internet-connected set-top for the service before the video-rental company spun the project back into Roku less than a year later.
Previously, Wood had said Roku was considering going public in 2011. Last week, he said "we're in no rush" to launch an IPO.
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