Roku’s next steps: Hulu, then Yahoo TV Widgets

If you read this blog often, you know I’ve been road-testing a lot of set top boxes for the past two years. I do this because I cover video, but also because it’s a disruptive moment in the history of the video and if there’s lessons to be learned about disruptive innovation, this market provides ample opportunity to be tutored. (All props to Clay Christensen at HBS, by the way, for defining the way we all look at disruptive innovation. That’s worthy of a separate post at a later date.)

After spending significant time with the Roku box during some recent sick days, I have concluded that the Roku is still the box that delivers the most punch, especially considering its price. That’s why the Roku box won our Convenience Quotient analysis on set tops last summer and it’s only getting better as the Roku team adds more content. 

The Roku is the only box that I want more than one of — one for the living room and one for the family room.

But it still has a long row to hoe if it’s going to end up in a million homes. In particular, I see a threat in the form of connected TVs. I’m writing a piece for Forrester on that topic right now, should be out in a few weeks, but the conclusion is pretty optimistic: thanks to supply-side energy, the Yahoo TV Widget space is making it likely that connected TVs will be in more than a million homes by year-end, possibly two million.  

So here’s my prescription for Roku to stay in this game. I haven’t discussed these things with the team there, but I’ll make them a matter of public record so that if I’m right or wrong, at least I’ve been bold.

1 – Get going on Hulu. This might mean starting with CBS (which is dramatically more open to radical syndication moves, as evidenced by the YouTube relationship) or Viacom, as a way to show Hulu that this is the way things are moving. The sooner ad-supported TV shows up on Roku, the sooner it’s a must-have $99 box for everyone.

2 – Become the first set-top box to implement Yahoo TV Widgets. I cannot get this widgets solution out of my mind. It’s such an elegant way to open the market to innovation and I like innovation. From what I’ve learned from the people in charge of the Yahoo TV Widgets strategy, the code to accomodate the widgets should be relatively simple to put on the moderately powered Roku box. But the beauty of having widgets on the Roku box is it would immediately relieve Roku of needing to strike separate content deals with every possible content provider. Instead, it can just let content providers develop whatever they want for the platform, making the box more valuable with each passing day. 

The fact is, every box, DVD player, TV, and game system (Wii Widgets?) will eventually implement Yahoo TV Widgets. (I know that’s music to Yahoo’s ears, but when you do the right thing strategically, it tends to work.) So Roku better hurry. 

Last thought: once these steps have been conquered, it’s time to start courting HBO and other pay TV providers to discuss delivering subscription-based content to the Roku. Not something HBO wants to do (not something Comcast wants it to do), but it’s where things are heading. And as long as HBO is priced higher on the Roku than it would be through Comcast, which is certainly what HBO would have to do, it might be feasible by 2010. 

What do you think?

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11 Responses to Roku’s next steps: Hulu, then Yahoo TV Widgets

  1. Dave Zatz says:

    How would they overlay widgets on live TV, without a source of live TV? They’d be standalone widgets on a stand alone box… I heard from Intel that they are working with box manufacturers and I heard from Yahoo that Comcast (!) is an initial partner as well.

    I do love my Roku box. I have an Xbox, I have some TiVo’s but the small, silent form and quick nav make it my first choice for Netflix streaming. And if they land Amazon VOD in HD before TiVo, I’ll gladly pick up a second unit for the living room.

  2. Dave Zatz says:

    PS They still may have to negotiate individual licensing. From my discussions with Yahoo, different manufacturers are working out different dealios. Some will have exclusive content, and others will be limited by hardware choices, etc. Yahoo doesn’t control widget availability, the manufacturer does.

  3. […] Roku’s next steps: Hulu, then Yahoo TV Widgets I do love my Roku box. I have an Xbox, I have some TiVos, but the small, silent form and quick nav make it my first choice for Netflix streaming. And if they land Amazon VOD in HD before TiVo, I’ll gladly pick up a second unit for the living room. […]

  4. Roku Fan says:

    The Roku box is great. No doubt about it.

    I question their decision to offer Amazon Unbox next. I think that Hulu support is more important.

    Note, for example, that the upcoming Boxee software for Mac, Windows and Apple TV is offering both Netflix and Hulu ahead of Amazon.

    Let’s hope the Roku folks are listening and follow your advice on Hulu !

  5. James McQuivey says:

    I think what’s happening is that Roku is going after the easiest partners first. Amazon is easy because Amazon has: a) a streaming model, which the Roku requires, and b) the right to put the content on the TV with that streaming model. Hulu is harder because they have the rights to put the content on PCs, but some of their partners worry that if they compete directly with themselves on the TV screen, they’ll cannibalize their broadcast experiences. That’s one of the issues behind Warner Brothers Televisions’ removal of shows like the Mentalist. So even though I keep saying Hulu is a priority, I’m very aware that Hulu may not be in a position to acquiesce for a while. All the more reason to start raising the issue now so that people gradually get desensitized to it and eventually give in…

  6. James McQuivey says:

    Good question, Dave. Let me first clarify that the Yahoo TV Widgets platform is quite flexible. While most widgets are TV screen overlays, they don’t have to be. I’ve seen several widgets that take full control of the screen (in response to the viewer’s actions, obviously, not without consent). Essentially, you can use the TV widgets as a backdoor to full-scale interactive TV applications, complete with fullscreen streaming video content. That’s what gets me so pumped about widgets: you can do just about anything with it. Kinda like that thing we call the Internet.

  7. Dave Zatz says:

    I’ve been thinking long and hard on this. Why aren’t their Hulu hardware partners? I think you hit upon a part of it – fear of cannibalizing television broadcasts. It may go further, and involve licensing restrictions and financial considerations from the various studios and guilds. I bet the first iteration of official Hulu support for television devices will only be back catalog stuff…

  8. Dave Zatz says:

    Regarding the widget platform, I agree it should be more efficient for manufacturers to develop and/or hook into content. As a consumer of digital media, though, what I find really compelling about this initiative is the ability to interact with/on/over live television. Without another box, without switching inputs. Of course, folks aren’t going to upgrade their televisions on a year basis.

  9. Dave Zatz says:

    Given the Boxee situation, I guess I was right… ;)

  10. James McQuivey says:

    Absolutely the case, as I said, Hulu has to guard the interests of its content partners or it will lose the content behind it. I will be posting on this for Monday.

  11. Deborah says:

    Great comment and info. After reading most of it and comments, wonder if it is possible that HULU could be allowed to offer certain content in the living room, and other content only on the PC/MAC. Licensing issues, and the fact that networks ARE rather trying to keep HULU to the computer platform, since many of the shows are on regular network. But HULU has so much more to offer that COULD be allowed on ROKU, and I for one DO NOT MIND AT ALL the one minute commercials 4x per view. Heck that’s 4 mins versus 15-20 minutes on regular programming. Anyway, thanks for a great commentary and good information.

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