Roku Founder and CEO Anthony Wood on Platform Strategy

Yeah, so Roku is the leading streaming platform in the US by a wide margin. We stream a lot more hours than any of our competitors. And the way I think about Roku is we are a platform for distributing content in the modern internet world. And we distribute our platform a bunch of different ways. So you think about what's our business model: the first part is we have to distribute our platform, build scale of our platform, and we've got about 20 million active accounts at this point, up 47% year on year. And then we monetize that platform. So how do we build scale of that platform? We sell players. That's how we got into the business. We shipped the first Netflix streaming player, we shipped the first app store for television, we shipped the first streaming stick. And we've been competing with these other companies for a long time. I mean, Apple had Apple TV before we shipped the first Netflix player; for example, back then it had a hard drive in it. And Android actually licensed Android TV to TV companies before we started licensing the Roku OS to TV companies, although today we have almost the entire market for licensed OS. So why is that? That's because we've built a platform for streaming television, whereas our competitors have all built platforms for mobile and imported them to TV. So we built Roku—actually, Roku has the only operating system purpose-built for television. And that's what happens. I mean, if you take a step back and think big picture, when new computing platforms emerge, what is the pattern? The pattern has never changed: a new software platform comes out and wins on new hardware platforms. So if you go back, for example, the PC: well, before PCs there were mainframes and operating systems for mainframes. PCs became their own computing platform; mainframe operating systems didn't make that transition. They didn't become the operating system for PCs. Windows became the operating system for PCs. And when phones became their own computing platform, Windows didn't make that transition. You're probably not running Windows on your phone. Android, purpose-built for phones, and iOS, also purpose-built for phones, won that transition. And then if you look at smart TVs, which are becoming computing platforms getting their own licensed operating systems, those phone OSes have almost no market share, whereas Roku has a lot of market share because we've built a purpose-built platform for TV. So then people ask: okay, well what does that mean—purpose-built for TV? Well, it means things like TVs are a brutally cost-competitive business, so we built a software platform designed to give great performance on very low-cost hardware. And that's critical. That's why we, for example, have a $29 Roku streaming player, the lowest price point, yet still make a positive gross margin, where our competitors all subsidize to come within striking distance. You make money on that $29 device because you designed and built the software for TV. It's not bloated, so you have to build more expensive hardware around it to get it to run. Exactly, that's right. And then other examples are the ad model. Ads are super important in the TV business; a lot of the revenue for TV content companies comes from ads. So we built ads, targeted ads, the ability to do ads into the Roku ad framework, which is a first-class citizen of our operating system. There are other examples, but all of them are around the fact that we built software for TVs first.

Well, I think there's a lot of things changing as TV moves to streaming. The big thing that's changed is competition. Before streaming, there was not a lot of competition in TV. I mean, there was some competition, but cable companies only had a couple hundred channels, only certain big networks had access to those channels. Streaming allows any company to publish content to a television. Anyone can make a streaming channel for Roku; you don't have to be CBS or Time Warner or something. So competition is driving the innovation in streaming, and that's resulting in things like more content, lower cost, more choice for consumers. I think some of the changes we're going to start to see—one of the reasons Roku has been successful is there are over 6,000 different apps on Roku, what we call streaming channels. But that's a hard way to find content with so many apps. I remember when someone at Apple once said the future of TV is apps. Well, actually, the future of TV is not apps, because people are tired of looking in 6,000 apps for content. So I think one of the next evolutions in TV is how do we make it easier for consumers to find content when there are so many different publishers of content. How do we do that now? Well, we have something called the Roku Channel, which is a free, ad-supported movies and TV shows. But we just also added live news, we're going to keep adding more and more content. It's the sandbox where we bring content, make it into a content-first user interface, make recommendations, use our data platform and our machine learning platform to find content and recommend it to customers. And so we think things like the Roku Channel will become the way content publishers end up publishing on platforms.