Roku: Set-Top Boxes Drive Cable TV Subscriptions
Don't call Roku a cord-cutting tool. At the recent Streaming Media West conference in sunny Huntington Beach, California, Roku general manager Steve Shannon sat down for a red carpet interview to talk about Roku and pay TV subscriptions. Contrary to what people might expect, Shannon said, Roku reduces subscriber drop off.
"We’ll get painted with a cord cutter brush regularly, but the reality is that, I believe, when you put a Roku box next to a cable box that cable subscriber is less likely to churn," Shannon said. "That’s not what people expect about us, but the reason is because of TV Everywhere. For example, if they start using HBO Go on Roku, it’s by far the best way to watch HBO."
Pay TV customers unhappy with their monthly bills often say they'd prefer an a la carte system where they can pick the channels they want, rather than large bundles. Shannon doesn't see that happening, but he does see broadcasters starting to develop targeted digital content bundles.
"What I do see is those major programmers, not specifically HBO or ESPN, but really most of them starting to develop digital offerings," Shannon added. "So offerings that will be specifically focus for people who maybe don’t have a pay TV subscription or maybe want to buy more content on top of what they have. And I think those offerings are becoming increasingly powerful, so it’s not a direct chip off of the bundle, but a lot more content production that is being sold outside the pay TV traditional market."
For the full Roku interview, watch the video below:
Eric Schumacher-Rasmussen: Hi, I’m at Streaming Media West 2013 in Huntington Beach, California, and I’m talking to Steve Shannon who is the GM of content and services for Roku.
Steve Shannon: That’s right.
Eric Schumacher-Rasmussen: And Steve you just got done speaking on a panel about the business of TV Everywhere and we’ll get to that in just a minute. A little bit about TV Everywhere. But first let’s talk a little bit about Roku because I mean Roku is still far and away the leading set top box on the market.
Steve Shannon: Thank you. Indeed it’s true.
Eric Schumacher-Rasmussen: Why do you think that is? What is it about the Roku that has caught the attention of the average consumer so strongly?
Steve Shannon: Because we’re awesome. We have by far the richest content offering of any over the top service and it’s just extremely easy to use. So the experience is that simple and the content is just this incredibly wide array, 1200 channels, that people can access.
Eric Schumacher-Rasmussen: Now obviously there’s the Netflix and the Hulu and Amazon and the big names, but there’s also, as you said, there’s 1200 channels total. That’s a tremendous amount of content. How important is all that long tail? Are we still talking about the long tail?
Steve Shannon: The long tail, yeah.
Eric Schumacher-Rasmussen: How important are those long tail channels to what Roku has been able to achieve?
Steve Shannon: They are very important. What’s a very common anecdote is that you know most folks will have Netflix or Hulu and maybe Amazon or they’ll use another movie store like an M-Go and maybe some TV Everywhere channels. We just added Watch ESPN and we have HBO Go and things like that. So of course that’s what folks use as sort of the mainstay. But most households will have something that they’re passionate about that’s in the long tail. It could be yoga. It could something spiritual. It could be anime. It could be some sports. It could be foreign language programming. It’s all over the map really. But the passions are as you know, they vary widely. And most households have somebody that’s passionate about something that’s not in the mainstream and they can find it on Roku.
Eric Schumacher-Rasmussen: You think there’s any danger of consumers getting overwhelmed by that many channels on the Roku and how are you helping consumers navigate through that content? How do you plan to do that more in the future?
Steve Shannon: Not really to be honest. I mean, are consumer’s overwhelmed by the number of computer games? Are they overwhelmed by the number of TV shows? Are they overwhelmed by the number of apps and the iPhone app store? I mean, yeah, you could look at it that way, but the other side of it is it’s breadth. It’s choice. It’s all good. And yes, we do have to do a good job of providing a really easy user interface for folks to get there, but people tend to find out about the channels that they want through say their friends or maybe social media type websites or through promotion on Roku or on other platforms. They don’t find it by hunting and pecking around the UI. So they’ll usually come and they’ll sit down and they’ll say I want Machinima because I’m a computer gamer and I want to get all these videos about computer gaming. And when you know what you’re looking for it’s very easy to get to.
Eric Schumacher-Rasmussen: Right, right. Now as I said earlier, you were on a panel earlier about TV Everywhere and the business of TV Everywhere. How bullish is on Roku on TV Everywhere offerings like ESPN offering, you mentioned before, HBO GO?
Steve Shannon: We’re very bullish about TV Everywhere. I mean, I think it’s transformative for the industry, for the pay TV industry. The pay TV industry needs to respond to all of the internet only content, which will apply margin pressures and potentially cause churn and things like that. And I think TV Everywhere is a great answer for them. The idea is that now you have programmers like ESPN or MTV or Nickelodeon or Fox or HBO who can now not only provide video, but they can provide software as part of their experience. And when you think about HBO catering to their user and Nickelodeon catering to their user maybe adding games and ESPN catering to their user with maybe highlights and stats and things and maybe Fox Now catering with interactivity around American Idol or.. I’m just making stuff up, but these programmers know their audiences better than anyone. And so they can build the most appropriate experience, the most appropriate front end for their content and giving them the ability to do that is just going to deliver a whole new suite of value proposition into the pay TV bundle, and I think really will help preserve it and it’ll be really fun for the consumers to enjoy.
Eric Schumacher-Rasmussen: Right. Do you see devices like the Roku helping attract some of the people who have been cord cutters or maybe even cord nevers actually attracting them back to or for the first time to pay TV services?
Steve Shannon: I do, absolutely. It’s paradoxical. We’ll get painted with a cord cutter brush regularly, but the reality is that, I believe, when you put a Roku box next to a cable box that cable subscriber is less likely to churn. And that’s not what people expect about us, but the reason is because of TV Everywhere. For example, if they start using HBO Go on Roku, it’s by far the best way to watch HBO. I mean, it’s wonderful the breadth of the content, the quality of the content, the experience navigating into the content. It’s top notch. And so it just makes people feel that much more positive about their pay TV subscription that they shell out every month.
Eric Schumacher-Rasmussen: Right. And so there are also people, though, who are still making passionate arguments for a la carte content. Do you see that happening ever?
Steve Shannon: The idea of an HBO or an ESPN going.. I haven’t seen chinks in that armor to be honest. What I do see is those major programmers, not specifically HBO or ESPN, but really most of them starting to develop digital offerings. So offerings that will be specifically focus for people who maybe don’t have a pay TV subscription or maybe want to buy more content on top of what they have. And I think those offerings are becoming increasingly powerful, so it’s not a direct chip off of the bundle, but a lot more content production that is being sold outside the pay TV traditional market.
Eric Schumacher-Rasmussen: All right, well thanks, Steve, for your perspective on TV Everywhere and for a little bit more about Roku. I’m Eric Schumacher-Rasmussen coming to you almost live from Streaming Media West in Huntington Beach. Thanks again.
Steve Shannon: Thank you.
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