Why Roku Isn't Going After Gamers

Gaming Is a Feature, Not a Strategy, CEO Says

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When Amazon.com, Apple, and Google released updated versions of their streaming video devices this fall, all three companies pitched them as a way to play video games on TV. Roku is doing the opposite. In an interview ahead of the Roku 4 release on Tuesday, the company's chief executive didn't even mention gaming as he explained Roku's strategy.

Roku has offered some games for years, but CEO Anthony Wood doubts that Roku or any of its direct competitors will make much headway with gamers. "Our attitude on gaming is that it's a feature, not a strategy," Mr. Wood said when asked about gaming specifically. He thinks that Xbox and Playstation consoles will continue to win over the gaming elite and doesn't see much potential for converting mobile gamers into the couch-bound variety. "We think the middle ground of streaming players offering games is not really a viable market," Mr. Wood said.

Devices such as the Nvidia Shield and Playstation TV, which were built as streaming alternatives to expensive consoles, have yet to make much of a wave. Ouya, a startup that built an inexpensive gaming console on Android, was a Kickstarter phenomenon. But it never caught on, and the consoles were recently discontinued when the company was sold. "In terms of the impact these devices have had on gaming, it is close to none so far," said David Cole of DFC Intelligence, a firm that tracks the digital entertainment industry. "We think that is likely to change in the future, but not necessarily the near future."

Joost Van Dreunen, the chief executive of gaming research company Superdata, said that Apple's pursuit of gamers makes sense because of the company's dominance in mobile. Roku doesn't have those relationships with developers of mobile apps. "It'll be extremely costly for them to cultivate and subsidize an ecosystem of third-party developers who would ultimately build some killer app," Mr. Van Dreunen said. Amazon, which also lacks Apple's ties to the independent development community, has been building its own network of gaming studios to make games for Amazon devices.

There are some obvious reasons not to build games for streaming devices, said Todd Harris, the co-founder and chief operating officer of Hi Rez, a 200-person studio based in Atlanta. The company makes games for personal computers and gaming consoles and is working on its first mobile game. But Mr. Harris said Hi Rez doesn't plan to make games for set-top boxes. He's skeptical that the boom in mobile gaming will translate to success for similar games made to be played on televisions. "A lot of the most compelling content is based on touch control and short play sessions," he said. TV games won't work that way, so developers will need to treat them as new products altogether. "There really has to be tremendous adoption of the set-top boxes to get away from that and design games with different play patterns," said Mr. Harris.

Mr. Wood argues that Roku's major competitors are misjudging the market because of the incredible success of mobile games. "They want to replicate that on TV, but they can't because gaming has shifted to mobile," he said. "Our view is pretty simple: People want to watch TV on TV."

-- Bloomberg News

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