Roku Misses Exit, Plots IPO?

Dave Zatz —  February 22, 2014

rokutv

According to Bloomberg, Roku is contemplating a 2014 IPO but… “a decision to move ahead hasn’t been made, and the company hasn’t selected a lead banker.” Personally, I still believe their best exit strategy remains an acquisition and that they passed on the most prominent of suitors in Amazon – to both companies detriment. Roku’s largest challenge on the business side is that they pimp low cost, low margin hardware with insignificant recurring fees (on video/channel affiliate earnings). But licensing their appilicious platform itself may provide a way out. And, while the Streaming Stick is a failure, Roku TV looks to have legs and, pre-release, is already more noteworthy than Vudu’s similarly attempted pivot. As to others that might benefit, well LG is out having landed webOS. And Samsung’s already solid smart TV platform will be bolstered by Boxee skunkworks. Not to mention their best bet isn’t a sole television manufacturer but, rather, a company like Echostar/DISH (a Roku partner) or Rakuten (think Kobo) looking to expand into new markets.

4 responses to Roku Misses Exit, Plots IPO?

  1. “Exit” from what?

    Are they loosing money?
    Management/owners are fighting?
    Want out of the hardware business?
    No further growth potential?
    Home office has cockroaches?

    What are they trying to exit from?

  2. Sorry for the jargon… We engage with and analyze quite a few startups, not to mention four of my last five employers were acquired. Most startups receive financial backing from outside entities and those investors hope to see their initial funds returned along with substantial profits. Based on my own reliable sourcing and Peter Kafka’s coverage, I know Amazon and Roku flirted a few years back and, at the time, I thought that was an ideal exit strategy for both the product and backers. Of course, I don’t know what the numbers were, if they even ever got that far in talks, and Roku chose to move forward on their own. Given the landscape in relation to what they offer, I believe their upside is limited (as an independent business entity, not as a product – which we’re quite fond of, I own three). Again, I don’t know what numbers they’re talking and I haven’t seen their roadmap. But, yes, they’re probably not profitable and need money to grow the biz – it’s why they’ve closed at least 5 rounds of investment, with a biggie last spring of $60m, and one of several reasons to consider an IPO.

  3. This spring, The Hollywood Reporter said that Roku wanted to, “move past a box that streams content from the Internet, and into the development of software built into TVs with services that help attract viewership.” They quoted CEO Anthony Wood, “We see a huge opportunity to be an operating system for televisions and that’s what were focused on right now.”

    In December, Stephen Kay joined Roku as General Counsel.

    “[Kay] will be a great asset to the Roku executive team and his experience will be instrumental in guiding the company as we take it into the next stage of growth,” Roku CEO Anthony Wood said in a statement.

    Kay focuses on transactional work. He worked for Gemstar-TV Guide until the company was sold in 2008, then rejoined Hogan Lovells in 2009.

    I believe Roku has always been for sale (see TWC venture) and will remain for sale until it is sold or goes out of business. The wash of new Roku devices is designed to keep the company in the news until their services business takes off (it won’t) or someone buys the company. I think an IPO would be fascinating. Would you invest?

  4. I think the sale of ‘Boxee Skunkwork’ to Samsung just goes to show how immature the business is still. IMO what Boxee has to offer above and beyond the XBMC that its based on is franky not worth having, let alone the rumored $30m that was paid. The existing smart tv Samsung developed is not something to write home about either so I think that will be a case out of the frying pan into the fire. We all hope that they recognize the disturbing levels of buffoonery that went into the making of that software and shelve it indefinitely, and just write off what amounts to chump change for Samsung anyway.

    The Roku on the other hand is a completely different animal. Simple, clean and fast interface, no memory leaks that mean I need to reboot it daily, no mandatory updates that break half of the functionality etc. The Samsungs, LGs, Sonys, of this world will really show they are on the right track when they start looking at this as an option.

    This is where they could get the best of both worlds. The roku hardware is about as run of the mill and cheap as it gets. So I think they could really thrive by maintaining their stand alone player, while partnering with tv manufacturors to have roku tv as the software running on the onboard computer. With hardware as vanilla as it is, chances are the software used to make the tv ‘smart’ will eventually be at the choice of the consumer.