Wednesday, October 27, 2010

Roku to license its platform: The low-cost alternative to Google TV?

Engadget reports that Roku has begun licensing its hardware and software to consumer electronics companies. Its first licensee, Netgear, essentially repackaged the new Roku XD and is selling it at Best Buy, Radio Shack and Fry's. To date, Roku's market penetration has been limited by its distribution--prior to the Netgear deal, the only way to purchase a Roku set-top box was to buy it from Amazon or direct from Roku.

If you're a consumer electronics manufacturer, you can license the Google TV platform for free, but the hardware necessary to make it work is expensive: Consider that the least expensive Roku box sells for $59.99, while the Logitech Revue Google TV-compatible STB retails for $299.99. Even with a substantial licensing fee to Roku, consumer electronics manufacturers could add Roku capabilities to their HDTVs or Blu-Ray players for a fraction of the cost of the Google TV architecture. Shaving a few cents off the manufacturing cost of a product can make a big profit difference, and a Roku-based device has the potential to be much more profitable than one based on Google TV.

Even for manufacturers like Vizio who have developed their own Internet video capabilities, it may make sense to license the Roku platform and take advantage of its off-the-shelf ability to access Netflix, Amazon Video-on-Demand, Hulu Plus, Pandora, Major League Baseball, Vimeo, Sirius XM and many other content providers. Negotiating deals with content providers takes time and money, and licensing the Roku platform would allow these manufacturers to focus on manufacturing and marketing, not content acquisition.

Could Roku end up in as many devices as Netflix currently does? It's a real possibility.
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