Roku On Track To Hit 1 Million Set-Tops This Year

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Roku, the Internet set-top startup spun off from Netflix, is on track to have shipped about 1 million boxes by the end of 2010 -- and already more than 10% of its customers have cut the cord on cable and satellite TV service, according to vice president of business development Jim Funk.

Privately held Roku as of January 2010 had sold about 500,000 set-tops, which are used primarily to access Netflix's instant-streaming service. By reaching the 1 million mark, that implies that at least 100,000 Roku users will have cut the cord by the end of this year to use broadband-delivered video as a primary component of their entertainment diet.

Funk, speaking on a panel at the Digital Hollywood conference here Wednesday, noted that the large majority of Roku users still have cable or satellite TV service. But he said a vanguard of customers is using the box as their primary source of video entertainment. Another double-digit percentage of Roku users have downsized their TV services, such as by canceling a premium movie package.

"They're cobbling together their own video entertainment experience," Funk said.

When Roku has surveyed customers to find out what additional content it would take to persuade them cancel cable or satellite service, "it's actually not a lot, but it's not the same thing for any one person," Funk said. For some people, it's sports programming and for others it's certain cable shows, he said.

In general, though, "there's a pretty high dissatisfaction with cable and satellite, whether that's price/value or service or whatever," Funk added. "The model for the industry over 10 years will look quite different."

According to J.D. Power & Associates' 2010 residential TV service survey, the average satisfaction rating on the cost of pay-TV prices fell 2.5% compared with last year while overall satisfaction stayed essentially unchanged.

Saratoga, Calif.-based Roku has about 100 content partners, including Netflix, Hulu Plus, Major League Baseball, the National Hockey League and Pandora. The firm's set-tops are priced starting at $60.

Netflix's streaming Internet service offers on-demand access to more than 20,000 TV show episodes, movies and documentaries. Netflix now accounts for more than 20% of downstream bandwidth consumption during peak times in the U.S. and is heaviest between 8 and 10 p.m., according to a survey by Sandvine, a provider of bandwidth-management systems.

Roku's investors include venture-capital firm Menlo Ventures; Netflix last year sold its stake in Roku to Menlo.

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