Good afternoon everyone. My name is Casey Finney, executive director of editorial programming at Fast Company. I'm excited to talk to Anthony Wood, founder and CEO of Roku. Let's start with 2008 when the Roku box launched with Netflix, allowing streaming to TV. What was the home entertainment landscape then, and why was the Roku box revolutionary?
Netflix was doing DVDs by mail but had always planned streaming. YouTube might have started around then, but it wasn't like today. The first streaming service from Netflix was so bad they gave it away free with DVD plans. The industry didn't want to license TV shows or DVDs. We made the first streaming player for Netflix, called the Netflix Player, and it did well, selling 100,000 units the first year. We kept updating software, adding a TV app store, other streaming services, and universal search, and it took off.
And you know, the Roku box was by no means your first major invention, because I'd be remiss if I didn't mention that Anthony created DVR. So, if you think about the DVR, if you think about the Roku box, what's behind your ability to see just around the corner to what's next?
Well, that's—I don't know, but it just comes naturally to you. My background is engineering, so I've always been interested in tech. One thing that makes me good at that is understanding what can actually be made. People suggest inventions, but I focus on what's possible with technology. I also have a good sense of what people want to pay for, which I learned from starting companies early and failing before success.
And you know, you mentioned the leap from 100,000 units to 35 million, and Roku becoming massive. Where do you see Roku sitting in the current ecosystem of streaming home entertainment? You've carved out a significant lane, so how do you view Roku in this overall landscape?
When people think of Roku, they think of streaming players or Roku TVs, but if you look at our revenue, roughly $5 billion in platform revenue and $0.5 billion in device revenue. Devices are a small part, and we lose money on them—they're sold below cost to build distribution. We're a distribution platform for streaming services, distributing 40% of all streaming, and monetize through subscriptions, billing, and advertising.
And you know, I'm curious because, as I mentioned earlier, you started your first business in high school. You've always had this entrepreneurial and innovative spirit. How do you maintain a culture of innovation within Roku while operating at this massive scale? Because sometimes the bigger you get, the harder it can be to be agile.
That's a hard problem. Innovations have to generate significant revenue now; things that used to be exciting for $100 million don't cut it. We need to grow 20% plus a year, which on $5 billion is $1 billion, so we need billion-dollar ideas. It's easier to grow existing businesses than come up with new billion-dollar ideas. There's financial pressure as a public company; we have to be profitable and grow earnings. Roku has $2 billion in the bank but can't spend it all at once without showing a loss. Part of the solution is the base culture: empowering people, low politics, hiring great teams. We're always looking at growth opportunities, like Roku Ads Manager for small businesses and our new streaming service Howdy.
Since you brought it up, let's talk about Howdy. It's a new ad-free streaming app. I want to discuss the name, especially since we're in a room full of Aggies, and how you see Howdy fitting into the Roku ecosystem.
I didn't come up with the name; our marketing team did. They might have been playing to my interests as an Aggie. Howdy is a good name for a consumer product—it's friendly, approachable, and memorable. Downsides: not easily trademarkable and people think of Westerns, but it's not a Western service. It's a good name overall.
And you launched Howdy as a service to complement, not compete with giants like Netflix. Why is a cheaper complement the right strategic move for Roku right now?
Roku's business is roughly $5 billion, half advertising, half subscriptions. We have the Roku Channel, which is 6.4% of all streaming, the number two app on our platform. We have Friendly, a low-cost virtual MVPD, and Howdy, launched less than a year ago. The streaming market has evolved; services like Netflix used to be low-cost, ad-free, but now raise prices and add ads. That original part of the market is gone except for Howdy. It's library content, not originals or sports, but that's a large part of viewing. Howdy targets low-cost, ad-free, and will keep adding content. People subscribe to multiple services, so Howdy complements Netflix well.
Why do you think the sector of low-cost ad-free was neglected? Why are you the one to fill that hole?
Large companies like Netflix have to keep growing for their stock price, so they raise prices and spend on expensive productions, abandoning the low-cost, ad-free market. For Roku, it's all new revenue, so it's upside. In five or ten years, with AI, Howdy could have AI originals and become a mainstream service.
Speaking of Howdy, let's make an announcement to these fine folks.
We're going to give free Howdy subscriptions to all Texas A&M freshmen for a year.
And we'll have Howdy devices in the back. Find me or our staff to get set up. Also, we're giving everyone a streaming player.
Yeah, a streaming player. Save fifteen bucks.
The benevolence is amazing. Thank you, Anthony. What advice would you give to current A&M students who want to build successful companies?
