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.