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MARCH 2020 FORBES ASIAsmart TVs sold in the U.S. during the first nine
months of 2019. But other TV makers are jump-
ing in: Samsung, the world’s leading TV manufac-
turer, announced last May that all of its new smart
TVs would come with the Apple TV app built in.
Roku also faces rivals in the ad world. Media
conglomerate Viacom bought the free, ad-sup-
ported streaming service Pluto TV for $340 mil-
lion in March last year. NBC is launching Pea-
cock, its own streaming service with advertising,
in July.
Wood says he welcomes all entrants. “The ex-
citing thing for me about the streaming wars is
that humongous companies like Disney are all
going in on streaming,” Wood says. “That’s only
good for us.” But he might want to press pause on
that button. These big media players may be al-
lies today but foes tomorrow. “Everyone has real-
ized the living room is too important,” wrote Piv-
otal Research CEO Jeffrey Wlodarczak in a Sep-
tember report titled “Is Roku Broku?” “And the
big boys... are likely to make Roku growth much
more difficult.” Wood had better start thinking of
his next pivot soon.Undaunted, Wood founded Roku in 2002. He
cold-called Netflix’s Reed Hastings and asked
him to lunch. Hastings took the meeting. “I guess
he’d heard of me because of Replay,” Wood says.
Hastings invited Wood to join Netflix as vice
president of Internet TV in 2007 and guide Net-
flix’s streaming player, code-named Project Grif-
fin, through production. After 10 months, Wood
left, at which time Netflix spun Project Griffin
into Roku and became an early investor (it sold
out a few years later).
Roku sold its first set-top boxes in 2008. This
time Wood kept prices low—the first went for
$99.99. Today its cheapest device sells for less
than a third of that. As of 2018, Roku had nabbed
a 41% market share of streaming media devices—
more than Amazon Fire TV, Google Chromecast
and Apple TV. The business is still growing but
competition is heating up while prices drop.
To stay relevant, beginning in 2014 Roku part-
nered with several TV makers, including China’s
TCL and Hisense and Japan’s Hitachi and Sanyo
Electric, to build its operating systems into TV sets.
According to Roku, its software is in one in three“Traditionally, the only way you would measure
a TV ad is through Nielsen ratings, which could
tell you roughly how many people have watched
it,” Wood says. “Our measurement is very precise,
where we can tell a company that out of everyone
who saw your ad, 5% went to your website and
bought something,” he explains. “We’re bringing
the sort of technology that’s already been around
for a while on the internet to the TV world.”
Roku does this with in-house measurement
tools, but also with 11 partners including New
York-based Nielsen in order to tell advertisers
like clients Jaguar Land Rover and Baskin-Rob-
bins how their ad campaigns performed against
which demographics.
The shift seems to be paying off. In 2015, 84%
of Roku’s $320 million in revenue came from
hardware; 16%, or $50 million, came from ad-
vertising and content. Now advertising is the
fastest-growing segment, and those numbers
have nearly flipped. Roku doubled down in Oc-
tober, announcing a $150 million acquisition of
dataxu, a Boston-based tech outfit that allows cli-
ents to plan and buy video ad campaigns.The Vault
TIVO’S TROUBLES“Our plan is to run
as fast as we can,”
vowed Michael
Ramsay, co-
founder and CEO
of TiVo. Almost a
year after debut-
ing its little box
at the Consumer
Electronics Show
in Vegas, TiVo
had gone public,
reached a $1.4
billion market
valuation—and
lost nearly $32
million while ac-
cumulating a few
thousand dollars in
revenue from early
subscribers. The
challenges ahead
for Ramsay and
TiVo were clear:
“The technology
of searching and
recording, which
is not protected
by patents... can
easily be copied.”
—Forbes, Novem-
ber 29, 1999Roku’s stock has rocketed up over 270%
since the beginning of 2019.
Investors are loving it. Roku’s stock has rock-
eted up over 270% since the beginning of 2019,
pushing its founder’s net worth to $2.6 billion.
It recently traded at a rich 12 times sales. “I have
no idea why Roku is valued [so high],” says Wed-
bush Securities’ Michael Pachter.
Wood’s plan to cater to advertisers comes from
an early failure. In the early 1990s, figuring there
had to be a better way to record episodes of his
favorite TV show, Star Trek: The Next Genera-
tion, than using VHS tapes, he came up with a
DVR. The initial product, marketed as ReplayTV,
was released in 1999 and cost around $1,000.
Big mistake. Rival TiVo sold its boxes for report-
edly under $500 and gobbled up market share.
Low on cash, Wood sold ReplayTV in 2001 to
Santa Clara-based consumer electronics firm Son-
icBlue for a reported $42 million and stayed to
help run it. To differentiate it from TiVo, Wood re-
leased a version of ReplayTV with an ad-skipping
feature. Bigger mistake. The company was sued
by everyone from Paramount to MGM to Disney.
SonicBlue went bankrupt. “We didn’t take indus-
SHERRY TESLER/THE NEW YORK T IMES/REDUXtry requirements into account,” Wood now says.
TECHNOLOGY