Page 50 - Forbes - USA (December 2019)

The Vault
TIVO’S TROUBLES

“Our plan is to run as fast ments into account,” Wood now says.
as we can,” vowed Michael
Ramsay, cofounder and CEO of TiVo. Almost a year Undaunted, Wood founded Roku in 2002. He

after debuting its little box at the Consumer Electronics cold-called Netflix’s Reed Hastings and asked

Show in Vegas, TiVo had gone public, reached a $1.4 bil-
lion market valuation—and lost nearly $32 million while him to lunch. Hastings took the meeting. “I guess
accumulating a few thousand dollars in revenue from he’d heard of me because of Replay,” Wood says.

48 early subscribers. The challenges ahead for Ramsay Hastings invited Wood to join Netflix as vice
and TiVo were clear: “The technology of searching and
recording, which is not protected by patents . . . can president of Internet TV in 2007 and guide Net- HOW TO PLAY IT
easily be copied.” —Forbes, November 29, 1999 flix’s streaming player, code-named Project Grif-

S According to

R fin, through production. After 10 months, Wood
O Billy Montana

T Roku Cont. left, at which time Netflix spun Project Griffin
P a TV ad is through Nielsen ratings, which could into Roku and became an early investor (it sold With 5G on the
U horizon, rich video
R tell you roughly how many people have watched out a few years later).
S game content is a
I it,” Wood says. “Our measurement is very precise, Roku sold its first set-top boxes in 2008. This great way to play

D

where we can tell a company that out of every- time Wood kept prices low—the first went for the streaming
H boom, according
C one who saw your ad, 5% went to your website and $99.99. Today its cheapest device sells for less to Billy Montana,
E
T bought something,” he explains. “We’re bringing than a third of that. As of 2018, Roku had nabbed portfolio manager

• at $21 billion (as-
the sort of technology that’s already been around a 41% market share of streaming media devices— sets) Jackson
N
A for a while on the internet to the TV world.” Roku more than Amazon Fire TV, Google Chromecast Square Partners.
I A top holding:
R does this with in-house measurement tools, but also and Apple TV. The business is still growing but New York City’s
A with 11 partners including New York-based Nielsen competition is heating up while prices drop.
R Take-Two Interac-
T in order to tell advertisers like clients Jaguar Land To stay relevant, beginning in 2014 Roku part- tive. “The best
N investment today
O Rover and Baskin-Robbins how their ad campaigns nered with several TV makers, including China’s is in the content
C performed against which demographics. TCL and Hisense and Japan’s Hitachi and Sanyo owners,” he says.
The shift is paying off. In 2015, 84% of Roku’s Electric, to build its operating systems into TV sets. “Take-Two has the

best intellectual
$320 million in revenue came from hardware; According to Roku, its software is in one in three property in inter-

16%, or $50 million, came from advertising and smart TVs sold in the U.S. during the first nine active entertain-
content. Now advertising is the fastest-growing months of 2019. But other TV makers are jumping ment, a subcat-
egory of media
segment, and those numbers have nearly flipped. in: Samsung, the world’s leading TV manufactur- that should enjoy

Roku doubled down in October, announcing a er, announced in May that all of its new smart TVs secular growth for
the next decade.”
$150 million acquisition of dataxu, a Boston- would come with the Apple TV app built in.
As platforms fight

based tech outfit that allows clients to plan and Roku also faces rivals in the ad world. Media for its franchises,

buy video ad campaigns. conglomerate Viacom bought the free, ad-support- which include

Grand Theft
Investors are loving it. Roku’s stock has rocketed ed streaming service Pluto TV for $340 million in Auto, NBA 2K
up over 340% since the beginning of 2019, pushing March. NBC is launching Peacock, its own stream- and Civilization,
its founder’s net worth to $3.3 billion, a $2.6 billion ing service with advertising, next April. Montana expects
tolls charged by
jump since January. It recently traded at a rich 17 Wood says he welcomes all entrants. “The excit- Xbox and PlaySta-
times sales. “I have no idea why Roku is valued [so ing thing for me about the streaming wars is that tion will fall from
their current 30%
high],” says Wedbush Securities’ Michael Pachter. humongous companies like Disney are all going
of Take-Two gross
Wood’s plan to cater to advertisers comes from in on streaming,” Wood says. “That’s only good revenues to 15%,
an early failure. In the early 1990s, figuring there for us.” But he might want to press pause on that and points out

its pipeline is at a
had to be a better way to record new episodes of button. These big media players may be allies to- record high.
his favorite TV show, Star Trek: The Next Gener- day but foes tomorrow. “Everyone has realized
ation, than using VHS tapes, he came up with a the living room is too important,” wrote Pivotal
DVR. The initial product, marketed as ReplayTV, Research CEO Jeffrey Wlodarczak in a September

was released in 1999 and cost around $1,000. Big report titled “Is Roku Broku?” “And the big boys
mistake. Rival TiVo sold its boxes for reportedly . . . are likely to make Roku growth much more HOW TO PLAY IT BY ANTOINE GARA; SHERRY TESLER/THE NEW YORK T IMES/REDUX
under $500 and gobbled up market share. difficult.” Wood had better start thinking of his

Low on cash, Wood sold ReplayTV in 2001 to next pivot soon.

Santa Clara-based consumer electronics firm Son-
icBlue for a reported $42 million and stayed to help
F IN AL T HOU GH T
run it. To differentiate it from TiVo, Wood released

“IN GENERAL, OBSOLETE
a version of ReplayTV with an ad-skipping feature.
TECHNOLOGY IS OBSOLETE
Bigger mistake. The company was sued by every-
FOR A REASON. MONOCLES
one from Paramount to MGM to Disney. Sonic Blue
ARE NO EXCEPTION.”
went bankrupt. “We didn’t take industry require- —Neil Blumenthal
F O R B E S . C O M D E C E M B E R 3 1 , 2 0 1 9