Since shipping its first player in 2008, Roku Inc. has become an important platform for streaming video, with a comScore study earlier this year finding that it was the leading streaming video platform in the US, responsible for a 49% share among specialized OTT video streaming devices.
Roku ended 2016 with more than 13 million active subscribers (those that have streamed in the previous 30 days), who streamed more than 9 billion hours of video and music over the course of the year. This was an increase of 5.5 billion hours over 2015.
It is now looking for additional channels to get to the consumer, partnering with TV manufacturers to have its operating system, Roku OS, installed on new smart TVs. According to the company, approximately 13% of smart TVs in the US have a Roku OS today, up from 8% in December 2015. Partners include Element, Hisense, Hitachi, Insignia, Sharp and TCL.
The company is also looking to partner with service providers. Andrew Ferrone, VP for pay-TV at Roku, joined Telco Transformation to discuss the company's strategy for the telecom sector, which Roku is actively involved with already.
Telco Transformation: What led Roku to partner with service providers?
Andrew Ferrone: The development of streaming video is both a threat and an opportunity for the industry as a whole, but we think it's mostly an opportunity for telcos. The reality is that the data consumption -- for their broadband service -- is largely going to be video. The share of video is going to skyrocket, become the number one source of traffic. There is incredible consumer pull, through both fixed and mobile.
We became involved with operators as they looked at this and said, "how can I use video or add value to video services?" Our first partnership was with Sky (NYSE, London: SKY) for its NowTV streaming service and we also have a relationship with Telstra Corp. Ltd. (ASX: TLS; NZK: TLS) in Australia and Philippine Long Distance Telephone Co. (PLDT) in the Philippines.
[NowTV is Sky's pure OTT service; it is aimed at non-Sky customers in the UK and other Sky markets.]
TT: What is the product offered to operators?
AF: We provide a Roku box which is co-branded with the operator's brand and the "Roku Powered" brand. The same branding is on the UI and the remote control. Operators can select from a range of Roku units that we have specified.
We have also worked to develop a new box for Sky, so that's also something we can do for some of our bigger customers. The new box is for NowTV, and it's a hybrid digital terrestrial broadcast (DTT) and OTT box, which will allow NowTV customers to receive free over-the-air signals and their NowTV streaming videos. And they can also get catch-up and additional streaming services, like Red Bull, available through Roku.
For Sky, this lets them reach customers who weren't eligible for whatever reason for their satellite service. In fact, 90% of NowTV customers had never considered subscribing to a Sky service before. So that's a new addressable market that Sky doesn't reach with its pay-TV offering.
TT: Who is responsible for acquiring content, deciding what apps sit on the box etc.?
AF: It's Sky's app store -- they control it. It's up to them if they want to use deals we have already made or make their own deals [for what is featured on the box.]
It's their users, their app store, their relationships. We give them control of the things that drive their business. We handle app development, on-boarding of apps etc., but they get to pick or add to the list.
But we aren't [like traditional] vendors, it's not a buyer/supplier type of relationship. We have a consumer business of our own -- it is mission critical for us to think about our business, develop best practices and how to win in this space. So we are striking deals, developing, thinking where to position and price, develop the ad platform, mobile services, new devices all of that -- and then we bring it to them.
TT: But in the US, you also feature operators' apps on the retail Roku boxes?
AF: Yes, we have two models. We provide the platform for streaming services for operators like Sky and Telstra, but we also have a different approach. We are also working with several operators like Time Warner Cable, which was the first to launch on Roku, and then Dish with Sling, and then Charter, Comcast and now Centurylink. And you'll see more Tier 2s and 3s coming on-board.
This is a different model -- we provide a distribution service for their TV Everywhere apps on our device. Currently, we have app distribution deals for 13 million active users.
TT: What are your plans for the near future?
AF: We see streaming as the future. All content will be streamed at some point in the future. There is a lot of innovation required in the transition, and different people are at different stages in that transition, but everyone is on that trajectory.
We think we have the best streaming solution -- for whoever wants it.
— Aditya Kishore, Practice Leader, Video Transformation, Telco Transformation