The Netflix – Roku Story: Never underestimate the scrappy underdogs

Netflix CEO Reed Hastings thought this startup would fail. But Roku turned from an afterthought into a $45 billion business. Here’s an epic story👇
In 2007, Roku CEO Anthony Wood cold calls Reed Hastings. Here’s how it MAY have went down😉: Wood: “Hey Reed I want to build the best TV streaming box for Netflix that the world’s ever seen.” Hastings: “How did you get my number?”
Wood: “I knew the area code and then guessed all 47,569 potential combos. It took me 146 hours. Can I take you to lunch to talk more?” *30 seconds of phone silence later* Hastings: “Well, you’re pretty persistent. Let’s do it.”
Wood hangs up and immediately grabs the champagne. He pops and spills it all over his brand new white office carpet. Ya win some ya lose some.
So Wood meets with Hastings and pitches the idea of building a streaming video box for Netflix. Reed wants no parts of this. He wanted to build this in-house. But Wood keeps pestering him. So they strike a deal:
Wood works part-time at Netflix as Vice President of Internet TV. Netflix’s streaming box = “Project Griffin” All the while, he stays CEO of Roku.
9 months later, Wood leaves Netflix. The reason: Hastings wanted Netflix to be streamed on the Playstation, Xbox and Apple TV. Those companies refused to do it without Netflix killing Project Griffin. They didn’t want the competition.
Lucky for Wood, he gets a sweet severance package: • Cash • Patents • Unfinished device • 30 Netflix employees for Roku In exchange, Netflix owns 15% of Roku.
Roku was a hardware company. But Wood realized that doubling down on hardware was a death sentence. He saw Roku as a central platform for all digital TV.
And he was right. Roku now has partnerships with • Netflix • Amazon Video • MLB TV • HBO Max • NBC’s Peacock • Disney Plus And launched their own Roku Channel too.
But that doesn’t explain how Roku owns 36% of video streaming market. More than Amazon AND Apple. The reason: Roku is pre-loaded into 15 different smart TV brands. They are the TV operating system for your nightly Netflix binges.
And this model is how they make most of their money today. • Roku hardware sales = $500 million • Roku advertising = $1.3 billion
10 years ago, most investors laughed at this hardware startup. But Wood knew that advertising would be their future. And that served as a Trojan horse to get Roku into 53 million homes in America.
Today, Roku is a $45 billion public company. And Netflix owned a 15% stake in the business. That would be worth $7 billion today. If they didn’t sell it for a $1.7 million gain in 2009. Never underestimate the scrappy underdog.
Follow me @chrishlad for more threads on • frameworks • systems • epic business stories
The story and numbers are true. But if you couldn’t tell, the dialogue between Reed and Anthony Wood was a joke…
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