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Roku Takes on Apple TV

A new player offers high definition for a low price.
September 24, 2010

In what’s shaping up to be the next big entertainment-meets-technology battleground, consumers are being presented with ever more ways to connect their television sets to the Internet.

Net connected: The Roku XDS, above, is one of the company’s new devices for streaming video over the internet.

This week, Roku, a company based in Saratoga, California, launched a new lineup of video players designed to stream high-definition content from Internet destinations such as Netflix, Amazon, and Pandora. The cost will be $60 for a basic player and $100 for one that offers a variety of ways to connect to other devices. Both are equipped for high-definition playback.

Roku was one of the first companies to stream Internet content to televisions; it released its first video player in May 2008. Since then, the market for Internet-connected set-top boxes for televisions has become much more crowded. Competition is intense because, along with free shows and clips, the Internet can be used to deliver premium, cable-like content. An Internet-connected set-top box can also be used to deliver ads that are closely tailored to viewing habits. “People are zeroing in on the same answer from multiple directions,” says David Krall, Roku’s president.

Many electronics companies sell televisions that can connect directly to the Internet, and last month Apple announced a new version of its set-top device, Apple TV, that will be considerably cheaper ($99 instead of $229) and sleeker, and will let viewers rent episodes of popular TV shows for 99 cents each. Boxee, a startup based in New York, is taking preorders for the new version of its Internet streaming device, which offers a wealth of free Internet content and a slick user interface. Even Google has decided it wants a slice of the television business, announcing a set-top box and service that is expected to launch later this year.

Roku has about 700,000 users–far fewer than the number of Apple iTunes users out there–but the company hopes to attract users by offering lower-cost hardware and high performance.

Roku president Krall believes that users will eventually be able to access any sort of content on any device. He also foresees “the end of linear programming,” when users no longer think about what time a show is broadcast, since they’ll always be able to get it on demand. Users may also become less interested in owning or recording shows and movies, since they’ll be able to stream them easily to any device. But for this to happen, several technical and legal problems will have to be overcome.

Networks have historically been reluctant to provide the most sought-after TV shows and movies to Internet-connected set-top boxes. They are worried that allowing consumers to watch content for free or pay low prices for individual shows will reduce other revenues. This sort of licensing problem is why the Internet TV site Hulu has attempted to block Boxee from pulling its content onto users’ television screens. Roku only delivers content that’s already been licensed for all screens, such as Netflix’s streaming video.

Content producers also license shows separately for different platforms–television, PC, and mobile devices. And streaming content from the Internet presents technical difficulties. For example, a user who wants to go back a few seconds to catch a missed line of dialogue often faces a frustrating delay as the content is fetched and buffered anew. Roku’s new products include an Instant Replay feature that stores content for a brief period in order to make the experience smoother.

Like some of the other companies in the field, Roku also offers an application programming interface that allows anyone to create applications for its players. In Roku’s case, this includes applications that are essentially channels dedicated to specific topics, which allows communities to build up around sometimes unexpected offerings. For example, Krall says, a user-created channel that broadcasts in the Telugu language, which is spoken in parts of India, has proven popular among the company’s customers. Krall hopes that opportunities for independent developers will be another factor that draws users to Internet-connected television.

Many companies see an Internet connection as key to the future of television. Last week, Samsung launched a new website with an app store for its Internet-connected televisions. Kris Narayanan, vice president of digital marketing for Samsung North America, says the company has been pursuing a “connective experience” whereby the Internet is used to allow sharing of content between different devices.

Sanjay Reddy, CEO of a company called LiveMatrix that tracks live Web-streamed events and a former executive at Gemstar-TV Guide, a company that licensed interactive program guides, says consumers will end up using their home entertainment systems to consume a mixture of content. They’ll want traditional programming, content from the Internet, and some nonvideo Internet content too. But products will need smooth interfaces and compelling apps to make users feel they’re getting the content they want, he adds.

“What is the user going to choose in terms of the way they keep track of this or interact with it or discover this content?” Reddy says. “That’s really what the battle is. It’s thinking about what’s the ‘start’ page, because that’s how people decide where to go.”

Reddy believes that Internet-connected TV solutions haven’t taken off so far because of the limited memory of set-top boxes. This is now changing, he says, because more data can be stored in the cloud rather than on the devices themselves. However, Reddy says, “it’s going to take time” before it’s commonplace for users to pull in content from the Internet.

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