Roku is set to release its first Smart TV sets, in partnership with Chinese TV set manufacturers TCL and Hisense. The Roku TV represents the tight marriage of display hardware, and a natively-integrated, 3rdparty Smart TV software platform. While TCL and Hisense - as well as future adopters of the platform - will be responsible for manufacturing the physical sets, Roku will provide the TV's user-interface, the Roku Smart TV platform itself, as well as a reference architecture for the set's remote control. While indications of price have yet to be released -indeed, pricing will be at manufacturers' discretion - Roku TV will launch initially in the US and Canada in the fall of 2014, and will be available in screen sizes as small as 32 inches and as large as 55 inches.
The Roku TV, in many respects, represents the progression of a strategy that Roku has been carrying forth for some time. In early 2013, the launch of the Roku-Ready program signaled a firm that was beginning to inch beyond the sale of standalone, over-the-top (OTT) boxes. With launch partners TCL, Hisense, Insignia, Coby, Hitachi and Westinghouse, the Roku-Ready program proposed an optimized Roku experience on compatible sets, and translated this experience onto the TV via a diminutive, MHL-compliant dongle - dubbed the Streaming Stick.
Roku TV supplants the very need itself for external hardware, and ushers Roku into a pure, unadulterated market for TV software, TV user-interfaces, and 3rdparty Smart platforms. With Roku TV, the firm will now be supporting a hardware and software business in tandem. The goal of this strategy remains straightforward - to spread the Roku platform far and wide, and to bring the Smart TV platform onto as many television sets as possible.
Roku does not sell boxes in a manner that generates substantial hardware income. Rather, the standalone box is simply a method of propagating the Roku platform across the market, and into consumer homes. It is the software platform itself which is economically remunerative, and which produces income via the revenue-share agreements that content providers present on the Roku platform enter into. In this market, scale is paramount, and it is scale and reach that Roku is attempting to broaden with Roku TV. Given that the year-end, 2013 installed base of connected Roku boxes stands at 4.8 million units, having multiple irons in the fire appears to be a sensible way of propagating the Smart TV and content platform.
Roku are still predominantly a US-based operation, and despite investment from BSkyB for its NowTV boxes in the UK, the Roku TV experience remains US-centric. However, the concept of Roku TV itself is not a North American phenomenon, but is instead part of a wider movement within the TV industry. As Smart TV platforms become increasingly common, all manufacturers will find themselves needing to offer Smart TV functionality in one form or another - yet the costs of building, maintaining and operating a Smart TV platform are often prohibitive for all but the largest tier-1 players such as Samsung, LG and Sony. For Chinese manufacturers, who offer Android variants in China but want localized platforms for overseas shipments, and for tier-2 and tier-3 regional brands, there has been a move towards the use of third-party operated Smart TV platforms. This has generated significant interest in the Roku platform in North America, and in NetRange solutions across Europe and Latin America.
The two Chinese TV set manufacturers with whom Roku is initially partnering, TCL and Hisense, both rank within the top 3 brands in China, but so far have achieved low volume in the US, given that the the brands are not yet widely recognized by US consumers. Nevertheless, these TV manufacturers are looking to leverage the Roku brand as a way to increase their profile in the US market. A great way for Roku TV to gain traction in North America could be to extend a partnership to a manufacturer such as Funai, which produces TVs under the Emerson, Funai and Philips brands, and is well positioned in the region, ranking in the top 5 in volume share in 2013.
For many consumers however, the standalone Roku boxes and streaming sticks will continue to be an attractive option precisely because they decouple the display from the Smart TV platform. Standalone devices allow households to upgrade and refresh the living room content experience, without necessarily having to replace the TV itself.