Roku has spent the last few years fighting for your living room against fearsome competitors — Google, Apple and Amazon — and it has more than held its own. Now it gets a payoff, via an IPO.
The pitch to investors: Get a piece of the next generation of the cable TV business, where video programmers who want to reach a huge audience will pay Roku to reach them.
A red flag for investors: Some of Roku’s biggest programmers don’t make Roku any money at all.
This news makes me sad.
I got my first Roku in 2008, and have purchased two more since then—not because they needed to be replaced, but because it is a fantastic product at a very reasonable price. They could raise their prices by fifty bucks and I would still happily pay. They do it exactly what I need, without piling on a bunch of gimmicky garbage that gets in the way.
But now, with an IPO in the works, they will be looking for bigger growth and higher revenues. Once they are public, these needs will likely eclipse all other concerns as investors press for magical numbers that never stop growing. Maybe advertising will become more prominent in the UI. Maybe they will add a subscription model. Maybe they will try to reinvent themselves as some sort of “platform” or partner with particular providers to produce premium content. One way or another, though, the pressure to pursue growth will degrade the customer experience.
Anil Dash wrote a Medium post a few days ago in which he discusses the need for a good printer that actually works. Like me, he is willing to pay a bit more for a device that is reliable and gets the job done without a bunch of add-on crap. Like Dash, I would totally buy the mythical printer he describes, but while he discusses a few of the challenges his proposal faces, I will state definitively that no one will ever build the printer he is talking about, just like I am sure that within a year of Roku going public, their devices will start turning crappy.
No one will ever build the printer and Roku will start to suck because with very few exceptions, no one can keep generating growth by manufacturing hardware. Sure, they can make money by manufacturing hardware, but investors don’t care about that—they want growth, a line on a chart that curves endlessly, increasingly up. You can’t do that by making hardware, and I would suggest that the notion you can do it by turning yourself into a platform is probably bogus too, but we’re too early in the cycle to admit that to ourselves yet.