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Roku CEO Anthony Wood has a plan to expand the company by adding smart speakers while aggressively pursuing new service and content strategies. Financial pundits disagree with the less profitable hardware expansion and advise the company to drop hardware prices and focus on higher margin content delivery. Roku's stock currently trades around $50 per share, down year-to-date even though it displays strong earnings.
Although financial advisors may worry that it’s a scattershot approach, in my opinion, it appears that Wood is setting the company up for an extraordinary expansion, all based on completing a Roku ecosystem by adding smart speakers and a full-blown infrastructure.
Roku has long been a customer favorite for delivering a streamlined product at a reasonable price that delights customers instantly. The company is tackling something much more ambitious than a smart speaker launch, it’s creating an end-to-end entertainment solution.
It’s always been an elegant solution to a complex problem. Sure, there are other streaming devices out there that may do more or cost less. But Roku provided a sophisticated, inexpensive solution to the mainstream market. From the beginning, the Roku has been a small, attractive, quiet, portable solution that fits on any shelf, can be set up by a novice, and has an intuitive on-screen experience.
Up until now, Roku has provided access to streaming content for only $40-$70 with no monthly subscription. The engineering and manufacturing costs that exceed the purchase price are collected from advertisers. The company earns revenue making content distribution simpler and promoting content rather than from a monthly subscription model.
Wood’s new hardware strategy depends on a Roku ecosystem which will add functionality to all existing Roku smart TVs – all enabled by smart speakers. He’s using the operating system of the new speakers to underpin Roku’s entry into smart home and voice control technology.
It’s a similar solution to Amazon’s entertainment domination strategy. The Roku plan is to implement voice controls via the speakers to enable entertainment control of your streaming solution. The next step will be an updated channel interface that can aggregate payments for content.
Roku Connect is the software platform infrastructure inside Roku’s Wireless Speakers. The innovative software platform allows other companies to build audio products that connect wirelessly to Roku-enabled devices. So you can control other devices using voice commands from a Roku TV remote. The launch of the software update enabling Connect is planned for late 2018.
You can’t have a voice-controlled smart speaker without an assistant. The Roku Entertainment Assistant has a planned launch in late 2018 to all Roku TVs, streaming players, and speakers. The intention is that consumers can use voice commands to control Roku-enabled devices, but won’t have the broader skill set of Alexa or Google Home.
At first glance, it seems odd that Roku is trying to make a late entry into the crowded, and well-funded, smart speaker market. But the new hardware provides the infrastructure for Wood to make a huge leap into services.
We’ve come to expect movie theater sound systems in the living room. In the tradition of Roku design, it’s a high-quality product that delivers. The speakers work exclusively with Roku TVs, which are made by nine brands and includes the functionality of the streaming device. The roster of Roku TV manufacturers includes models from Element, Hisense, Hitachi, Insignia, Magnavox, Philips, RCA, Sharp, and TCL. The simplified setup doesn’t require any cables or connections because it’s performed from within the Roku TV interface.
The Roku Wireless Speaker pairs to your Roku TV using Wi-Fi but includes two voice-enabled remotes. One tabletop version and a traditional Roku remote. The tabletop remote is intended to be stationed in a nearby room to control TV functions or stream music remotely.
By enabling wireless-only connectivity to the Roku TV, the speakers avoid the lip-syncing delay that is common with Bluetooth devices. Bluetooth is enabled for streaming music from your phone to the speakers, just not for the TV. The speakers are designed to work in stereo in one room, so you can't split them up for separate rooms. The speakers also feature automatic volume leveling and dialogue enhancement.
The Roku Wireless Speaker remotes control both the speakers and any Roku TV, delivering backward voice compatibility to all Roku TV models.
The Roku Wireless Speakers are priced at $200 per pair when they become available in October, but are only $180 for orders placed through October 15.
You’ve always been able to watch HBO Now on the Roku, but the new ecosystem infrastructure enables a marketplace where you can sign up and pay for a subscription to an OTT service. Much like Amazon Channels, Roku intends to launch a marketplace where viewers can sign up for a video subscription to channels of their choice and pay for it – all in one place.
Enabling customers to manage a customized bundle of channels with one program guide will distinguish Roku from every other provider. It eliminates the final stumbling block for consumers who want to cut the cord but don’t want the hassle of multiple services.
Financial pundits may disagree with expanding the product line with more hardware rather than concentrating on how the hardware investment opens up a full-blown marketplace. When you look into the strategy closely, you can see that the smart speakers are more about providing voice control to round out the rest of the offering.
Roku is poised to broaden distribution by unlocking the power of convenience. The first step is to provide voice control; the second is to monetize a channel marketplace like no other provider.
Integrating the streamlined viewing package into the Roku Channel elevates the value of the service and opens up a new line of revenue. With a powerful 37% share of the streaming device market and 25% of smart TVs powered by Roku, it stands to dominate a la carte subscriptions with the new model.
Megan Southard is a writer, mom, technology enthusiast, and movie junkie. She dreads the day her kids have to explain gadgets to her and is old enough to say, "I was the remote for our TV growing up."
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