Next TV: Roku Doesn't 'Root for the Demise of Pay TV’

San Francisco -- Roku tends to get characterized as a tool for cord-cutters, but the streaming platform is increasingly becoming a friend to cable operators and other traditional pay TV operators that are looking to expand the ways consumers can access their services.

“We get painted with that cord-cutter brush like we’re the enemy of pay TV,” Steve Shannon, Roku’s general manager, content services, said during a keynote discussion Tuesday here at the Multichannel News/Broadcasting & CableNext TV Summit. “But that being said we don’t root for the demise of pay TV at all.  In fact we’d like to see it grow…we just want it to be on our platform."


That’s already apparent with MSOs such as Charter Communications and Time Warner Cable that have developed authenticated apps for the Roku platform, but have stepped beyond that with more integrated partnerships.  

TWC, for example, is testing a set of IPTV tiers in New York for broadband-only subscribers that use the Roku in lieu of a traditional set-top box. Charter Communications is doing something similar with its trials of Spectrum TV Stream, an offering that starts at $13 for the broadcast TV channels, plus HBO or Showtime.

Charter’s offer is “a crazy good deal,” Shannon said in an interview with B&C’s George Winslow. “I think that kind of value proposition is part of the future.”

“The more money that's flowing through the pay TV ecosystem the better off we are, so we partner very closely with cable operators and cable help them be successful in a streaming environment and to grow their  business.”

Although the traditional TV ad business continues to encounter rough seas, in part because some viewing being delivered over-the-top isn’t being measured, advertising is Roku’s fastest-growing business segment.

Subscription-based services like Netflix and Amazon Prime are the most popular services on Roku, but Roku’s selection of pure, ad-supported services, such as Crackle and YouTube channels, “are really starting to come on strong,” Shannon said.

The TV has historically been the most powerful ad medium, but it’s been bleeding to the digital side, because the latter can be targeted, is more interactive and provides more granular data and reporting.

“Really for the first time we are combining those worlds,” Shannon said, noting that the ad story at Roku is being helped by scale – about 7.5 million households used the platform in the last 30 days.

 That's become interesting to advertisers so that ad dollars are starting to pour in…to these ad-supported networks. They’re starting to flourish and grow…We can’t get enough ad inventory…to sell.”

Regarding that portion of Roku’s business model, Shannon said Roku typically gets 30% of the ad inventory.

But Roku also makes money on its hardware and drives revenues from transactional digital video (movie and TV sales and rentals), and some business from subscription offerings. For subscriptions, Roku doesn’t always get a revenue share, but does if it wins/acquires the subscriber for a service such as Netflix, Hulu or Amazon.

Roku also makes money from its audience development initiative for channel partners. He said it’s one of the reasons why CNN has decided to launch an app on Roku’s platform.

Shannon also discussed the increasing role 4K will play on Roku, which supports it today on its new Roku 4 player and on select TCL 4K-TVs that are powered by Roku’s platform.

“We think streaming will be the main way that people enjoy 4K,” he said, noting that Roku is poised to launch UltraFlix, a streaming service that specializes in 4K content.

Shannon reiterated that Roku has no plans to offer its own branded content, leaving that to OTT platform competitors such as Amazon, Apple and Google.

“It’s a differentiator from our competition in that we don't compete with our content providers,” he said. “What that allows us to do is to really focus on  being agnostic and focus on getting the customer to watch what they want to watch rather than getting the customer to watch what we want them to watch."

But he did acknowledge that Roku has been “tempted” from time to time to develop its own content. “Never say never, but so far our credo is really to not compete with our content partners.”