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“Traditionally, the only way you would measure Undaunted, Wood founded Roku in 2002. He
a TV ad is through Nielsen ratings, which could cold-called Netflix’s Reed Hastings and asked
tell you roughly how many people have watched him to lunch. Hastings took the meeting. “I guess The Vault
it,” Wood says. “Our measurement is very precise, he’d heard of me because of Replay,” Wood says. TIVO’S TROUBLES
where we can tell a company that out of everyone Hastings invited Wood to join Netflix as vice
who saw your ad, 5% went to your website and president of Internet TV in 2007 and guide Net- 31
bought something,” he explains. “We’re bringing flix’s streaming player, code-named Project Grif-
the sort of technology that’s already been around fin, through production. After 10 months, Wood
for a while on the internet to the TV world.” left, at which time Netflix spun Project Griffin TE
Roku does this with in-house measurement into Roku and became an early investor (it sold
tools, but also with 11 partners including New out a few years later). CHNOL
York-based Nielsen in order to tell advertisers Roku sold its first set-top boxes in 2008. This
“Our plan is to run
like clients Jaguar Land Rover and Baskin-Rob- time Wood kept prices low—the first went for OG
as fast as we can,”
bins how their ad campaigns performed against $99.99. Today its cheapest device sells for less vowed Michael Y
which demographics. than a third of that. As of 2018, Roku had nabbed Ramsay, co-
The shift seems to be paying off. In 2015, 84% a 41% market share of streaming media devices— founder and CEO
of Roku’s $320 million in revenue came from more than Amazon Fire TV, Google Chromecast of TiVo. Almost a
year after debut-
hardware; 16%, or $50 million, came from ad- and Apple TV. The business is still growing but ing its little box
vertising and content. Now advertising is the competition is heating up while prices drop. at the Consumer
fastest-growing segment, and those numbers To stay relevant, beginning in 2014 Roku part- Electronics Show
have nearly flipped. Roku doubled down in Oc- nered with several TV makers, including China’s in Vegas, TiVo
had gone public,
tober, announcing a $150 million acquisition of TCL and Hisense and Japan’s Hitachi and Sanyo
reached a $1.4
dataxu, a Boston-based tech outfit that allows cli- Electric, to build its operating systems into TV sets. billion market
ents to plan and buy video ad campaigns. According to Roku, its software is in one in three valuation—and
lost nearly $32
million while ac-
Roku’s stock has rocketed up over 270% thousand dollars in
cumulating a few
since the beginning of 2019. revenue from early
subscribers. The
challenges ahead
for Ramsay and
TiVo were clear:
Investors are loving it. Roku’s stock has rock- smart TVs sold in the U.S. during the first nine “The technology
eted up over 270% since the beginning of 2019, months of 2019. But other TV makers are jump- of searching and
pushing its founder’s net worth to $2.6 billion. ing in: Samsung, the world’s leading TV manufac- recording, which
It recently traded at a rich 12 times sales. “I have turer, announced last May that all of its new smart is not protected
by patents . . . can
no idea why Roku is valued [so high],” says Wed- TVs would come with the Apple TV app built in. easily be copied.”
bush Securities’ Michael Pachter. Roku also faces rivals in the ad world. Media —Forbes, Novem-
Wood’s plan to cater to advertisers comes from conglomerate Viacom bought the free, ad-sup- ber 29, 1999
an early failure. In the early 1990s, figuring there ported streaming service Pluto TV for $340 mil-
had to be a better way to record episodes of his lion in March last year. NBC is launching Pea-
favorite TV show, Star Trek: The Next Genera- cock, its own streaming service with advertising,
tion, than using VHS tapes, he came up with a in July.
DVR. The initial product, marketed as ReplayTV, Wood says he welcomes all entrants. “The ex-
was released in 1999 and cost around $1,000. citing thing for me about the streaming wars is
Big mistake. Rival TiVo sold its boxes for report-
that humongous companies like Disney are all
SHERRY TESLER/THE NEW YORK T IMES/REDUX Santa Clara-based consumer electronics firm Son- that button. These big media players may be al-
going in on streaming,” Wood says. “That’s only
edly under $500 and gobbled up market share.
good for us.” But he might want to press pause on
Low on cash, Wood sold ReplayTV in 2001 to
icBlue for a reported $42 million and stayed to
lies today but foes tomorrow. “Everyone has real-
ized the living room is too important,” wrote Piv-
help run it. To differentiate it from TiVo, Wood re-
leased a version of ReplayTV with an ad-skipping
otal Research CEO Jeffrey Wlodarczak in a Sep-
feature. Bigger mistake. The company was sued
tember report titled “Is Roku Broku?” “And the
by everyone from Paramount to MGM to Disney.
big boys. . . are likely to make Roku growth much
SonicBlue went bankrupt. “We didn’t take indus-
his next pivot soon.
try requirements into account,” Wood now says.
MAR CH 2020 more difficult.” Wood had better start thinking of F ORBES A SIA
