Roku Makes First Jump Inside Smart TVs, Trying to Beat Apple to the Punch

Company cuts deals with Chinese manufacturers TCL and Hisense, announces sales of nearly 8 million set-tops to date

Roku Makes First Jump Inside Smart TVs, Trying Beat Apple the Punch

Roku’s trim little Internet set-tops have held their own in competing with similar Apple TV devices from the world’s biggest tech company. Now the smaller company has embarked on a strategy to widen its footprint through deals with TV manufacturers to embed Roku software into smart television sets — and get ahead of Apple’s rumored plans to debut a smart TV of its own.

On Sunday at the 2014 International CES, Roku is unveiling Roku TV, a platform touted as providing a simpler approach to smart TVs. The company has partnerships with China’s two biggest TV makers, TCL and Hisense, which plan to demo their Roku TVs at the show.

Roku is not abandoning the set-top business. Indeed, the company said that as of the end of 2013, it has sold just under 8 million media players in the U.S. since introducing them in 2008. Last year, total streaming hours on Roku players increased 70%, to 1.7 billion hours, the company said.

The company hopes to license the new Roku TV reference design platform and software stack to other manufacturers. But Roku will surely have a tough time landing deals with major HDTV manufacturers.

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The top five TV makers worldwide — Samsung, LG, Sony, Panasonic and Sharp — together held 62% of the market in 2012, according to NPD DisplaySearch. And those manufacturers have well-established smart TV platforms and strategies today, so Roku will have a very hard sell with the biggest TV players. Those CE makers also are unlikely to be interested in co-branding their smart TVs with Roku.

For the last two years, Roku has chased a different strategy for plugging into Internet-connected TVs with the external Roku Streaming Stick. But so far, the company hasn’t been able to reach deals with the biggest CE makers to support the set-top-on-a-stick, which uses the Mobile High-Definition Link (MHL) spec (instead of standard HDMI like Google’s Chromecast).

In any case, Roku said smart TVs running its platform are expected to be available for purchase in the fall of 2014 from retailers in the U.S. and Canada, available in screen sizes ranging from 32 to 55 inches with pricing to be announced.

“Consumers will enjoy the ease and satisfaction of Roku TV while manufacturers leverage our design specifications, content relationships and software expertise,” Roku CEO Anthony Wood said in announcing the partnerships. “At the same time, the content community will gain additional distribution and revenues through an already popular and trusted streaming platform — now in the TV.”

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Roku is trying to convince CE makers it should be the brains of their Internet-connected TVs by emphasizing its simplified approach. The Roku TV design has a home screen that unifies all content sources in one place, with options for watching live TV, streaming a movie or listening to a song. The overall approach is less complicated, according to Roku: For example, the Roku TV remote control has 20 buttons — half the number found on traditional TV remotes.

Roku TVs can be controlled by either the TV remote or via mobile devices using the Roku app for Apple iOS or Android. In addition, Roku TV supports modern stream-casting standards including DIAL, which streams content from a mobile device to the TV.

Like Roku’s streaming players, Roku TVs will have access to 1,200-plus channels including those for Netflix, Amazon Video, YouTube, HBO Go, Hulu Plus, Walmart’s Vudu and Pandora — more content options than any other smart TV on the market, Roku says.

Roku has raised $140 million in funding, including a $60 million round last May led by Fidelity Investments, with participation from Hearst and previous investors British Sky Broadcasting (BSkyB) and 21st Century Fox. Other investors include Dish Network and venture-capital firms Menlo Ventures and Globespan Capital Partners.