As Netflix rises, Roku drafts nicely behind

Every time I turn around, it seems Netflix is announcing something new. These past few weeks my little fingers have typed furiously to keep up with Netflix, which I will now refer as the company formerly known as the DVD-by-mail company. Two weeks ago, I wrote about Samsung adding Netflix to some of its Blu-ray players. Then there was the announcement that Netflix had finally enabled streaming on the Mac (okay, okay, Intel-based Macs, but still). Then there was the revelation that said company would provide HD streaming on the Xbox 360 and other devices. Finally, I posted just last Thursday that Netflix was partnering with TiVo to expand its streaming to yet another device. (Convenience note: you can mouseover these links to see the text of the page without actually clicking on them)

Just remembering typing it all inflames my carpal tunnel. Now that I’ve had some time to think this through, I’m still impressed with Netflix. But wait a minute. In all this, there’s one definite winner behind all the announcements: Roku.

btw, this is not an ad, this is just the most attractive picture I found on the website: I don't get paid anything if you click on this and order

Yes, I’m talking about the maker of the $99 streaming video box that in my back-of-the-envelope estimations has probably sold more than 50,000 units in the six months since its launch. This is the box that I proclaimed the winner in the over-the-top set-top-box shootout I wrote in July. But secretly, after writing that report, I started to fear for the box’s survival in a world where Netflix is off enabling every other device you’re thinking of buying this holiday season.

Then the recession hit. Follow my logic here: you hear that Microsoft Xbox 360 Live members can stream Netflix to their TV sets. That sounds cool enough to try, you are one of nearly 9 million Netflix subscribers aftera ll, but then you add up the additional costs — $199 for the low-end Xbox 360 Arcade plus a $7.99 a month subscription. Add that up for a year and you have $295. (Of course, the plan from Microsoft is that you already own an Xbox and this motivates you to sign up for the Xbox 360 Live Gold Membership, but just humor me.)

So you then hear that select Blu-ray players from Samsung and LG now allow for Netflix streaming. You were considering a Blu-ray player anyway, so you look into these and find they retail for $349 to $399. Then you hear that TiVo will offer Netflix, but you have to get the $299 TiVo HD at a minimum, not to mention the monthly service charges. You’re starting to feel daunted, so you go to Netflix.com and see all these options on one page so you can figure out which one is best for you.

You find the Netflix Ready Devices page, which shows you all of these options, and what do you see? Roku listed at the top, at a nice $99 price. Oh, and by the way, it’s the only one that comes with built-in wireless connectivity for those who don’t have ethernet in the living room. Especially in a recession, the Roku seems like a low-risk option.

I shared this line of logic with Tim Twerdahl, VP of Consumer Products at Roku, an ex-Netflix guy on Friday. I could practically hear the smile on his face over the phone as he agreed with my logic. Then he confirmed it: “Our sales are up dramatically in October.” And that in a recession.

Of course, the point of all the other boxes is that they do other things, not just Netflix. The Xbox does games, TiVo does DVR, the other guys do Blu-ray. When I shared this concern with Tim, he responded very confidently that I should stay tuned. What I have long been calling the Netflix/Roku box will soon shrug off the Netflix moniker by adding other premium content. This will only drive up sales on this box even more. Soon it will outsell the Roku Soundbridge home audio device that never really got past 100,000 users in four years of selling. There’s a business in this box; Roku is here to stay.

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6 Responses to As Netflix rises, Roku drafts nicely behind

  1. Nathan Safran says:

    You make a bunch of good points. These days, I open my computer in the morning wondering where Netflix will be streaming from next. The toaster? Fridge? :)

    I think things will get *really* interesting when they stream directly to the network enabled TV set. If they hook up with the right partners they could give a free x month subscription with the purchase of the TV. I think the content partners that are first in the door with the TV mans. have a good shot at capitalizing on the future of digital content flow into the home (no additional hw outlays when streaming directly to the tv…). As you point out, if the last few weeks are any indicator, my $’s on Netflix.

  2. James McQuivey says:

    Love your thinking, Nathan. That’s taking it to the next level. Just had a conversation with a major media retailer who is trying to figure out the right balance between selling content and devices. This might help.

  3. […] Jim was playing hard to get last week on stage, or, rather, Blockbuster has seen the aggressive announcements from Netflix in the past two weeks and concluded that it cannot afford to let Netflix get too far ahead in this […]

  4. […] Before we move into the “many devices, many services” model, a quick interim step called the “many devices, one service” model flourishes briefly. This is best exemplified by the Netflix on LG, Xbox, Samsung, TiVo, and so on model. I love this model and have written about it copiously. […]

  5. […] separate box (as is the case with the myriad solutions we have already discussed on OmniVideo like Roku, Xbox 360, and even LG Blu-ray players). See Brad Stone’s piece at the New York Times for […]

  6. […] doesn’t do much for me. I’ve written extensively about Roku’s sucker punch, its $99 Netflix box that is so easy to use that it is flying off of Roku’s shelves. And I was genuinely […]

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