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?

First evidence HDTV sales might get hit by recession fears

I mentioned last week when the Dow was plummeting that I was polishing off a piece for Forrester on what a downturn does to video entertainment in the home. That report is due out tomorrow, so I’ll bring it up then, but notice that today’s Wall Street Journal reports the first evidence that HDTV sales might be headed for a crash. Check it out at: Economic Woes Hit HDTV Sales – WSJ.com

This is interesting in light of last week’s assertion from the CEA that TVs and other A/V hardware weregoing to grow 4.7% this year despite a looming recession. If I had to bet, I’d bet on zero growth for the category.

Zero growth is not as drastic as it sounds. This is a category that’s notoriously elastic in a down or up economy, according to Current Expenditure Survey data that I’m citing in my piece later this week. However, specific subcategories and even brands can still grow. Take Vizio, which will be the low-cost substitute to which more people will turn. The Wii will sell out again (though fewer games will sell than hoped, while game rentals will go up a notch). Maybe the enormously popular Wii Fit balance board will slow down, but that’s a big maybe (have you tried it? sooooo cool). And I’ve already written about the Flip camera’s likely ability to weather the storm. 

So bad news it not bad news all around. The people who sell rice are thrilled right now. Rice always goes up in a down economy.