Netflix sold a stake in this company for $7.4M. The company is now worth $50B and one of their biggest competitors.
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2) In 2002, Anthony Woods started a company called Roku. It didn't go anywhere until he joined Netflix in 2007 as VP of Internet TV.
Netflix decided to take it over and called the project, Project:Griffin.
3) The goal?
Build a set-top box to allow Netflix users to stream Netflix content to their TVs.
Netflix had 20 engineers working on the platform. It was a few weeks from launch until Reed Hastings, CEO of Netflix, intervened.
4) Reed Hastings said:
"I want to be able to call Steve Jobs and talk to him about putting Netflix on Apple TV, ... But if I’m making my own hardware, Steve’s not going to take my call.”
Hastings killed Netflix internally and spun the team out.
5) Another high-level employee explained:
“Imagine you drive a Chevy, and the gas station is branded Ford ... Would you feel comfortable filling up your tank there? I think that’s why Reed didn’t think this could be done inside Netflix.”
6) The new Roku incorporated in February of 2008 and received a $5.7M investment from Netflix.
The company later received a Series A investment from Menlo Partners for $8.4M in October 2008.
7) Roku's first device launched on May 20, 2008. Of course, it's first partnership was with Netflix.
The product allowed users to search and stream Netflix on their TV.
8) Roku launched two new models in October 2009. It added support for Amazon Video, http://MLB.tv , and introduced a third-party channel store.
Users could download third-party apps for other content services.
9) In July 2012, Roku introduced its second-generation model. A few months later, the Roku dongle came out.
It was less expensive, easier to update and more portable than anything else on the market.
At that time Roku supported more than 400 channels.
10) In 2014, Roku began to really take off when it entered into partnership with TCL, a Chinese technology company.
Roku would be pre-installed on every TCL TV in the US. TCL would leverage Roku's brand awareness.
Roku is now partnered with 15 TV brands.
11) In 2014, TCL ranked 13th in TV sales with less than 1% of the market. In 2019, TCL ranked 2nd in TV sales with 18% of the market.
The partnership turned TCL into a brand name and put Roku in more households than ever before.
12) Roku's distribution helped them enter into a new business, advertising.
In October 2019, Roku announced the acquisition of Dataxu, an advertising platform that lets marketers plan and buy video ad campaigns, for $150 million.
Roku's ad revenue reached $740M in 2019.
13) In September 2017, Roku went public. But do you know who didn't own any stock? Netflix.
They sold their stake (worth $7.4M) to Menlo Ventures in 2010 for a pre-tax profit of $1.7M.
14) Roku's success came down to positioning. The platform was "content-neutral". It didn't compete with OTT services like Netflix or Amazon Prime Video. It slowly built up its distribution to be the #1 Smart TV OS in the US with 38% of market share (51M active accounts).
15) Today Roku is worth $50B. It has 1,800 channels and just purchased Quibi's library. It is the latest signal that it's not just a content aggregator, but a content distributor. Roku is no longer the Switzerland of streaming.
16) In hindsight, Netflix's decision to sell Roku was the right one. It's highly unlikely Netflix would be where it is today if it didn't.
But the biggest irony is that one of their biggest competitors is an invention all their own.
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