Is Roku Really Kicking Cable's Butt?


VentureBeat’s run a rather provocative headline that declares “Roku is kicking the cable industry’s butt.” Yet, it’s not exactly clear how they could be.

First thing first, we’re big fans of Roku. In fact, we were amongst the very first to purchase their original Netflix streamer, currently own several modern boxes, and named the $50 Roku LT as “a box of the year” in 2011. Yet, even with all that love, we just don’t see any way that Roku could be kicking cable’s butt.

In terms of numbers, Roku has moved about 2.5 million boxes. That represents one time sales and a small but growing recurring revenue share. Beyond that, Roku isn’t actually profitable. Meaning they spend more money than they ingest. Compared to say a Comcast. Yeah, they may have lost 19,000 cable customers last quarter but that still leaves them will more than 22 million households… who pay them each and every month for premium television services. And, as a company, Comcast is quite profitable — bringing in more than a billion dollars each quarter. So Roku’s clearly not kicking cable’s but when it comes to penetration or revenue.

Analyst Jose Alvear suggests Roku could exceed cable when it comes to user satisfaction, especially in regards to price (related to that aforementioned profit). And I’ll give him that. Dealing with the cableco can be brutal – from multiple missed appointments, an inability to support CableCARD, and countless billing issues over the years there’s been many a time I’d like to have walked. Yet, despite inferior customer service along with rising prices, for my money pay TV still represents a decent value that Roku can’t replace.

Further, Roku doesn’t actually own the content or the pipe. Whereas many cablecos, for better or worse, have a piece of that action. And, again, provide a more sustainable model of recurring fees. Speaking of content, Roku’s top two channels, by usage, are Netflix and Hulu – both subscription services with Roku acting as merely one end point… among many. They may have moved 2.5 million boxes, but how many more smart TVs, connected Blu-ray players, and PS3 or Xbox consoles out there provide the same?


Additionally, in terms of content, one of Roku’s most compelling channels is HBO GO. Which actually requires a cable subscription. Of the remaining advertised 400 Roku “channels”, how many are worth watching with any sort of regularity? Heck, one of my top choices was HGTV. Until HGTV realized it was being offered on Roku without their consent… and had it yanked. And then there’s the notably missing-in-action YouTube. Pay television providers like DirecTV and Verizon FiOS provide access through their set-tops, whereas Roku doesn’t even offer this online staple.

So, while the cord cutting and cord shaving phenomenons are real, we don’t see Roku kicking cable’s butt. In fact, we’d say they make a mighty fine accessory to pay television.

17 thoughts on “Is Roku Really Kicking Cable's Butt?”

  1. I’m convinced that if you really want to cut cable, you need to buy the content you want to watch. Whether thru iTunes or Amazon, you own the show without commercials and can watch it where and when you want to.

    There are too many idiotic device restrictions on the streaming services. Perfect example is Hulu, where you can watch everything in a web browser, but not thru a Roku box.

  2. VentureBeat is a bit of a joke publication as far as I can tell. Their typical article consists of a few facts woven around wild speculation and an odd thesis, which then becomes even more Inflammatory in The Headline (EXCLUSIVE) as some sort of attempt to game TechMeme. Seems to be working. Spotted on my radar when they ran the headline “Flickr disables Pinterest pins on all copyrighted images (exclusive).” Which was completely false, but did serve the purpose of getting the story on TechMeme.

    Of course, the actual news (photos which were blocked from Twitter, Facebook & blogs would now be blocked from Pinterest as well) scarcely qualified as a story. However, that didn’t stop the copycat press led by such unironically named outlets as ReadWriteWeb, from posting dozens of stories within hours as they pursued their page-view driven strategy of re-writing every news bit that garnered a TechMeme mention.

    VentureBeat topped their efforts by silently changing their headline to drop the “all” after it was repeatedly demonstrated that their assertion was 100% false. No mention how they created a story out of whole cloth, no mention of how they changed the headline, not even an update with a link to more info.

    Total hack publication. If I were TechMeme, I’d bar the site from being featured in the future. And if TechMeme doesn’t get their sh*t together and engage in at least a modest bit of editorial control by banning sites that refuse to update false stories, they’ll discover soon enough that someone else has come to eat their lunch.

  3. Considering accessing my Roku is dependent on my Comcast provided Cable internet, I’d merely call Roku a player in the game.

  4. The only real replacement for cabletv is piracy. There’s no other way to get a comparable experience, even if you’re perfectly willing to pay.

    Left to themselves, you’d think the content providers would be perfectly happy to allow consumers to pay for their content via subscriptions, paying for individual episodes, or bundled in a cable TV package.

    But the cable companies own these content providers, and even though it’s obvious to everybody that it’s increasingly obsolete, cable TV is a huge moneymaker, and being shortsighted old media dinosaurs, they chose to protect it at all costs, even if doing so drives consumers to piracy.

    And once you start pirating, you learn that it’s so easy, convenient, and most importantly free that you’re unlikely to stop. Assuming a legit avenue existed (which currently it does not), why would you pay for an inferior product?

  5. I think you’re comparing apples and oranges here. Roku is simply a media streamer. It is not and never will be a huge media company like Comcast or Time Warner. So much of the concept of the Roku kicking anyone’s butt is dependent on other companies and content providers. What Roku is doing is providing an alternative to money sucking cable, but so much of its success is dependent on the success of others.

  6. Jake, yeah, I was kinda wondering what was so “exclusive” about their talk with Roku. Guess they were the only site to speak with the CEO on that given day and hour? But I do give their PR team credit for attempting to build some buzz ahead of Apple’s announcement later this week, which may a refreshed aTV.

    Rich, so what you’re saying is that VentureBeat is comparing apples to oranges… as it’s their premise we’re reacting to.

  7. I cut the cord just like a lot of people who are not watching TV 24 hours a day. 400 Roku “channels” are similar to the hundreds offered on Cable as someone will be entertained by the different food or QVC like channels.

    Roku in particular has a good base of Private Channels that are simply not offered unless you pay through the nose via VOD on cable.

  8. I am a no pay TV person and have been again for several years.

    The most important thing a cord cutter needs is the ability to be happy with what you can get for free. For me it may help that for most of my life I only had access to less than 6 Channels and do not worship TV, having only had pay TV for less than 10 of my 54 years.

    My thoughts are cord cutters need good Over The Air (OTA) reception and a good OTA DVR to start. After that access to Internet streamed content helps and access to a few Red Boxes also helps to add variety. I haven’t actually rented/bought a disk or any Internet content for quit some time and have been happy enough with what I can legal watch for free, but I am not a big sports fan and currently live alone.

  9. Agree completely Dave.

    @Jake: Really really well reasoned post. I’ll rethink ever visiting VentureBeat again.

    @Adam: The economics of “owning” shows aren’t that great though. Just look at the typical cost of a Season Pass on iTunes. Even sticking to SD, a short season like “The Walking Dead” (which has been really good this season btw), would run you $22.99. A full season of something like “House” would cost you $38.99. Looking at a few different examples it looks like you’ll pay about $1.75 per episode. Call it $1.75/hour.

    So if you watch an hour a night of TV, it would run you about $52 to be entertained by iTunes programming. At two hours a day you’d likely exceed the cost of your cable bill. And while many people would be satisfied with much less than the potentially questionable 6 or 8 hours a day of TV that the “typical” American supposedly watches, it doesn’t seem atypical for cable to be the better deal.

    And that’s before including kids programming, sports, or movies or anything else that comes with your cable package.

    Hey, I love Apple in general, but without some kind of iTunes + OTA DVR or something I don’t see how this sort of thing works for a typical American family.

  10. I use Hulu desktop with a media center remote. Boxee for “channels”, and a web browser for the rest. It works out great. Even my wife can use it…heck my 3 year old son is on the living room plasma right now on youtube watching train videos yia leanback.

  11. My TV viewing is via OTA with a Tivo.

    So most content I watch is free.

    I only subscribe via Amazon to a few cable shows (downloaded to the Tivo)

    The above combination is MUCH less expensive than paying a monthly fee for digital cable (unbundled, over $80/month)

  12. I think Roku’s in a tough spot and is going to face the same issues traditional set-top providers do – commoditization and and razor thin margins. The only way to win that game is with a stellar supply chain and massive scale. There’s nothing sexy or growth-oriented about it. And I say that as someone who loves my Roku.

  13. It looks like to me that the content providers would just move everything to the Internet work with the makers of Smart TV’s making sure that their content will stream and then go directly to the endusers and sell the content to them and cut out the middlemen (cable companies). They would get 100% of the profits and the subscriber would get the TV that they want (a la carte) and everyone would be happy except cable as it would quickly go away. Simple, Simple, Simple. IS ANYONE LISTENING??????????????????????????????????????

  14. I just got a Roku, but it not “kick” any cable or satilite service butt, yet. Could it happen, yes but not in the next 5 years, right now we are still in the early adapters phase if they cut the cable. Most people are going to want the “new stuff” as it comes out, and from I see that is not happening right now. But if you are willing to hold off a bit for the “new stuff”.

    If you are willing to hold off a bit, till it gets to Netflix, Amazon, or the like, and willing to give up a few shows (you will get some that are not on the air anymore. I believe the shows gained vs the ones lost makes it a net gain for me.

    Most people will also not think about the cost much. but for me it a $80 savings a month when I cancel the TV subscription, that is $960 a year, I can think of more fun things to do with that money.

    At this point the only show I will not get is the Simpsons, but I can live with out 1 show, but I have gotten 4 differiant star treks that are not on the air in my area anymore, so as I said it is a net gain for me.

  15. We got a new TV with a Roku box on black Friday. We’re still getting out feet wet but as a consequence of the ROKU we’ll be canceling one of the 2 movie channels we have with DTV.

    We’ve had their upper mid level DTV subscription for over 10 years and recently have found the programming experience very frustrating.

    Too much reality stuff, history revisionist propaganda, mostly all channels goes to commercial at the same time, movie channels never change and mostly play to the media narrative and too many junk info stations to name a few frustrations.

    We long for the days when you had the option to read a newspaper during commercials …now you have constant sound maintenance issues that, like an errant child, you have to give immediate attention to.

    TV has become work!

    The hope eventually is to whittle down out subscription to the absolute minimum level…we’ll see.

    No this isn’t a business related tech head answer but I just don’t think we’re the the only consumers that don’t feel we’re entertained by conventional TV anymore.
    I only found this site because we’re interested in DIY home improvement channels…like HGTV.

  16. Not sure how Roku could kick but unless something new is out there that I’m unaware of. I like Roku but can’t DVR anything off of it, the clarity leaves much to be desired ( even though we have DSL) and we constantly loose signal or it gets really grainy. Right now I am waiting for a program that.was to come on at 11:30 pm; still waiting for the bouncing ball on the screen to go away and for the signal to come back on. I though I used to be able to back up shows too but no more. I think the idea is great but the technology is still lacking.

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