For the last several years, Roku has made delightful little boxes that allow people to watch video streamed from the Internet on their televisions. Now the company is cutting out the middleman, working with Chinese manufacturers Hisense and TCL to sell Internet TVs powered by its software. Roku first said it was building televisions at the Consumer Electronics Show in January, and is showing them off publicly for the first time this week. They will be on sale this fall.
The general look and feel will be familiar to anyone who’s used one of Roku’s boxes. Almost all of the 1,700 channels available through a standard Roku are also available on the TVs, with the exception of WatchESPN and Watch Disney. (Roku couldn’t reach a distribution deal with Disney for the new devices.) Smartphone apps allow people to pull up Netflix or YouTube videos on their phones and play them through the new TVs, so long as the devices are on the same wireless network.
Smart TVs have been a hard sell, which is odd considering most people in the entertainment industry will tell you they’re the future. It’s not that smart TVs haven’t made it into the wild. Over 60 percent of households with broadband connections have at least one TV that connects to the Internet, up 19 percent from the year before, according to the Diffusion Group. But Michael Gerson, Diffusion’s president, says he’s not sure how much the devices are changing people’s behavior. In other words, manufacturers are adding Internet connectivity to televisions, but not in a way that inspires people to actually use it.
Roku would seem well-positioned to change that. Its boxes are the biggest dedicated media-streaming devices in the U.S., accounting for 44 percent of the industry’s sales, according to Parks Associates. Apple TVs made up 26 percent of sales. Roku owners are also more likely than Apple TV owners to use their devices for over-the-top services like Netflix. Televisions potentially hold greater appeal because they integrating the cable and Internet viewing experiences. On the other hand, it’s a bigger hassle to replace a TV once the software goes out of date or the processor becomes obsolete within 18 months of the initial purchase. Roku says it will update the software regularly, but acknowledges there’s not much it can do about the inevitable obsolescence of the physical guts of its machines.
Unlike Apple, which has been rumored to be manufacturing its own television for years, Roku is satisfied to be the software provide for smart TVs. It makes more sense for companies like Hisense and TCL to take the company up on this than design their own operating systems, because neither company has Roku’s software expertise or the relationships with content companies. In exchange, Roku is sacrificing distinctive design and name recognition in the U.S. To most Americans, a Hisense TV will both look and sound like the generic brand.
On the other hand, they’re priced that way, too. While neither of Roku’s partners is a household name in the U.S., TCL is the third-largest TV manufacturer in the world, and Hisense is the sixth. They can turn this scale into cheap, cheap televisions. Hisense says it’s not setting a price on the televisions — it will let the retailers decide — but thinks its smart TVs can be sold for less than the combined price of a standard TV and a separate Roku box. TCL’s version ranges from $230 for a 32-inch model to $650 for a 55-inch version. When asked how they’ll distinguish themselves in the U.S. market, the two companies give almost identical answers, citing things like vertical integration and factories conveniently located in northern Mexico.
Both companies actually make smart TVs already, of course, but even their executives aren’t impressed by those efforts. Chris Larson of TCL says that until now, the industry has handled Internet connectivity in the same way it treated 3D–as a feature added to drive up the price of devices, even if people didn’t want it. “If you look at any smart TV on the market, including ours, it’s a dysfunctional experience,” he says.
