Roku: Future of TV is in Internet streaming

Anthony Wood's invention of the digital video recorder in the 1990s helped reshape the way couch potatoes watch TV, but he says the DVR is already headed down the road to obsolescence.

Wood said the future of TV is in Internet streaming, and the Saratoga, Calif., company makes simple, inexpensive devices that connect TV screens to a growing world of video -- from Netflix movies to commentator Glenn Beck's show -- that is stored out in the cloud.

So for the past decade, Wood, 46, has run Roku Inc., a company that's been steadily playing a big hand in driving the DVR out to pasture.

"Would you rather try to remember to record a show, or would you rather just have everything ever made instantly available on demand?" Wood said in a recent interview. "It's a much better experience."

Roku sold about 1.5 million devices last year in the United States, and in January sales began in the United Kingdom.

The expansion comes at a time when viewership of Internet streaming video is increasing. A recent report from the Leichtman Research Group said 38 percent of U.S. homes have a TV connected to the Internet, up from 30 percent last year.

"We've hit that inflection point, and it's really cascading," Wood said.

Most people now stream video through a game console, which figures because broadband connectivity has long been a standard feature for console makers. But only 1 percent of U.S. homes use a device like a Roku or Apple TV, the Leichtman report said.

Roku is hardly the only Internet streaming device maker, with Apple Inc. long rumored to be working on a device that may change the market. Even DVR maker TiVo Inc. markets its latest model as a one-source device for recorded and streaming video.

But Wood said Roku's prime market isn't the 18-to-25, tech-savvy type who would use a game console or line up to buy the latest new gadget. More often, he said, it's their parents. Roku hopes to open up that wider mainstream TV watching market.

"Our customers are not early adopters," Wood said. "They're people who watch TV. We put a lot of effort into making it really simple."

Wood sought a simpler way to record episodes of "Star Trek: The Next Generation" when he was inspired to invent a digital video recorder in the mid-1990s. He saw newspaper ads for computer hard drives and realized those could help replace analog VHS tapes.

His company, ReplayTV of Mountain View, Calif., and TiVo became the talk of the Consumer Electronics Show in 1999 when they both introduced first generations of what was then called a "personal video recorder."

But while TiVo, which takes credit for "development of the world's first digital video recorder," was able to take advantage of the dot-com bubble and go public, ReplayTV missed the boat and ran through its investment funding.

Later, cable and satellite operators added a DVR as features to their set-top boxes, "so it was hard for companies to make money building DVRs," Wood said.

Still, he said, "they were a stepping-stone product. They're still popular and they're going to be around for a while, but they're declining. The big thing for cable operators is to have a DVR in the cloud."

ReplayTV ownership has switched hands several times and is now part of DirecTV.

Wood, meanwhile, founded Roku in 2002. It's his sixth company and the name is the Japanese word for six.

Roku now has 400 entertainment channels available. Those include Hulu Plus, Amazon Instant Video, Crackle, HBO Go, Epix, NHL GameCenter Live, Pandora Internet radio and the "Angry Birds" game. There is even GBTV, a video network from political commentator Beck.

In all, Roku has sold 2.5 million streaming media players, with unit sales tripling last year as the company entered retail stores, including Walmart, for the first time.

The 170-employee company, which had about $100 million worth of sales last year, also did some limited holiday advertising.

In January, Roku introduced the Streaming Stick, a version of the media player built into a USB-size drive that can plug in to newer models of TVs that have a Mobile High-Definition Link-enabled HDMI port. The stick is supposed to turn the TV into an Internet-connected smart TV.

"And in two years, when you want to upgrade to the latest technology, you just replace it," Wood said.

Distributed by Scripps Howard News Service.

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