Roku Becomes Pay TV’s Streaming Box Of Choice, Raises $45 Million From News Corp, BSkyB, And Others

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When Roku first entered the streaming video market, it was seen as a boon for cord cutters, who could watch streaming content from online distributors like Netflix and Hulu Plus on TV. But lately, it’s begun courting app makers from traditional content producers, securing apps for premium networks like HBO and working with pay TV providers like DISH to bring their content over-the-top. With that in mind, Roku has raised a giant new round of funding, led by a couple of impressive strategic investors from the old media world.

Roku’s closed a $45 million Series E round, including money from News Corp and British Sky Broadcasting, as well as another unnamed strategic investor. Also participating are previous Roku investors Menlo Ventures and Globespan Capital. In addition to the new funds, News Corp chief digital officer Jon Miller has joined the Roku board. Altogether Roku has raised a total of $77 million since being founded in 2008.

The funding round will give Roku more capital to increase its marketing spend, while also expanding into new markets. But the strategic investment also comes with certain business agreements that will provide Roku more content from traditional pay TV providers. In one example of this, BSkyB’s Now TV streaming video offering is available for streaming on Roku boxes, allowing users to watch the subscription video service on their TVs. You can probably expect Roku to do more deals like this, where it becomes a sort of de facto cable box for alternative, over-the-top pay TV services.

As for News Corp, the media conglomerate already has a number of apps available on the Roku Channel Store, including those for Fox News, WSJ Live, and X Factor. As News Corp expands its digital media offerings, the media company will no doubt look to Roku as one more distribution outlet for its content.

Roku users watch about 12 hours of video on their devices each week — which means that’s probably 12 hours less traditional TV they’re watching. If for nothing else but fear of their losing audience, traditional content providers understand that being on Roku and other streaming platforms will be increasingly important as viewer attention becomes ever-more fragmented.

For Roku, though, the funding round and recent deals demonstrate what seems like a fundamental shift in its target customer base, as well as its future marketing strategy. Three years ago, it was the device you got if you wanted to stop paying for cable, but still wanted to watch movies and TV shows on the biggest screen in the home. CEO Anthony Wood has, in the past, noted that some 40 percent of its customers either cut the cord or cut back on their cable spend.

But nowadays, the company is pushing a complementary device for users who subscribe to pay TV but want to watch additional on-demand content from services like HBO Go, or who want to stream content to a bedroom or other room in the house, without having to sign up for another DVR or set-top box. For Roku, doing so provides a ton of upside: After all, only about 10 percent of American households don’t pay for cable, satellite, or IPTV services, so the addressable market for those complementary use cases, and the ability to monetize around them, is a lot bigger.

Not just that, but the number of networks and distributors offering TV Everywhere services continues to grow. HBO Go is just one example of a verified, complementary content offering available on the Roku, but there are bound to be more popping up soon. That will probably include apps from the very cable or satellite providers that Roku might have at one time sought to replace. Sky, for instance, is the first pay TV provider to bring its services to the Roku, but Wood told me on the phone today that the company is working with others.

That said, it’s not all sunshine for Roku and its new direction: Its recent exclusive deal with DISH to bring the satellite provider’s slate of international content to the streaming box, meant a number of independent internal channels were taken off its Channel Store. Even if the decision will mean more and better content for its users, as Wood claims, siding with a big traditional distributor over a large number of independents could scare some developers off.

After spending the last several years courting independent developers and offering itself up as an alternative to pay TV distribution, Roku is walking a bit of a tightrope. It has to prove itself as a viable distribution outlet for the content that people already know about, while also providing freedom for independent networks like Glenn Beck TV or WealthTV to make money without being crowded out.