Roku to build new television operating system

Roku (opens in new tab), the IP streaming television platform, has received a $60 million investment that it said it will use for the development of software that will attract television viewership.

The investment came from BSkyB, News Corp., Hearst and Fidelity Funds. It will be used, the CEO told the Hollywood Reporter, to migrate away from streaming media into services for promoting its channels to viewers.

“We see a huge opportunity to be an operating system for televisions, and that’s what we're focused on right now,” Anthony Wood, CEO of Roku, told the publication.

Wood is the founder of Roku and first investor in the Silicon Valley start-up. Previously, he worked on the first DVRs, helped create Adobe Dreamweaver (opens in new tab) software and was founder of ReplayTV.

The latest round of funding brings the money raised to date by Roku from venture capitalists and strategic investors to about $140 million. The company currently sells four versions of its streaming video players for $49 to $99 each. The most recent is the Roku 3 model. All make it easy to watch online media on standard television sets, with each model offering different features.

The program line-up includes hundreds of no-cost channels, plus access to subscription services like Netflix — which, along with Amazon Instant Video, Pandora (the music service) and Sony’s Crackle — are among the most popular channels on the device, the Hollywood Reporter said.

The Roku 3 is currently among the top five best selling electronic devices on The company estimates its users streamed more than 1 billion hours of video and music in 2012.

The Hollywood Reporter said Roku’s new revenue streams comes from the electronic rental and sale of movies. Each time a viewer completes a transaction through the device, the company gets a cut. Roku’s other big initiative is services, which means not only carrying channels but also promoting them. In return, the company gets a fee.

Roku has sold more than 5 million boxes in the U.S. as of the end of last year. The company, which recorded 2012 sales of $140 million, started in 2003 and marketed its first players in 2008.

In its next phase, the Reporter said Roku is working with about two-dozen OEM agreements that will allow smart TVs and other video devices (such as Blu-Ray players and sound bars) to come with Roku software built-in. The company says that there will be 3.5 million such devices available by the end of this year. Many of those are house brand TVs like Insignia, which is sold by stores like Best Buy.

Wood told the Reporter that these kinds of TVs represent about 30 percent of the market and are the fastest growing segment. He predicted it would be 40 percent by next year. There is also the Roku Streaming Stick, a small device the size of a USB plug that, when plugged into a TV, provides the same kind of access as the Roku boxes.

For many television viewers, Roku is an alternative to cable pay services. Wood said the top 25 percent of users stream an average of 35 hours of programming each week. He admits for many of them, “That is all they need.”