When Netflix founder Reed Hastings spun out Roku, the streaming video box in development, in 2008 and then sold his Roku shares to Menlo Ventures, he had no idea that this stake today would be worth almost $7 billion. Roku grew exponentially during COVID-19, with its shares rising 480+ percent from March 17, 2020; its market capitalization is now $45+ billion. The company, which went public in 2017, has become the dominant “intermediary” for streaming video distribution, with distribution to 50+ million households. Roku is now focusing on original content while continuing to expand its advertising.
CNBC reports that, “Netflix was Roku’s first customer, followed by Amazon Video on Demand and MLB TV,” more recently adding HBO Max, NBCUniversal’s Peacock, Disney+ and many other subscription streaming services.
According to Parks Associates, “Roku has taken a 33 percent to 39 percent market share every year since 2015.” In Q1 2021, “Amazon Fire TV tied Roku for No. 1 at 36 percent.” (Under a new agreement between Amazon and NBCUniversal, notes Variety, Peacock is coming to Fire TV set-tops and Fire tablets.)
Roku is also developing its own technology for targeted advertising and “acquired Nielsen’s advanced video advertising business to begin dynamically inserting linear TV advertising.” The company also debuted two content arms, The Roku Channel, which licenses content from other media companies, including 75+ Quibi shows. It’s also launching “an advertising brand studio to help companies make their own original content.”
Last year, Roku made about $510 million from its hardware and branded smart TVs and $1.3 billion from platform services. Founder Anthony Wood is now focused on “charting out a strategy for The Roku Channel.” CNBC reports that, “the 10 most-watched programs on The Roku Channel from May 20 to June 3 were all Roku Originals,” and notes that Roku’s content strategy is similar to Netflix’s; the former plans to spend more than $1 billion on content next year.
Roku also sells advertising “against every ad-supported application on its platform.” The Roku Channel is available on Amazon Fire TV, Apple iOS and Google’s Android, “though the company prefers users watch on Roku’s platform, where it can better monetize viewership data.”
Deadline reports that, “Roku Originals launched on May 20, with a lineup of about 30 shows initially made for Quibi.” It adds that, “more than one in three users of The Roku Channel streamed a Roku Originals series, with users streaming over nine episodes on average.” Whereas Roku has “about 54 million active accounts … The Roku Channel reaches households with 70 million people.
Roku CEO Anthony Wood Explains Why People Don’t Want to Talk to Their TVs and Why He No Longer Reads Business Books, CNBC, 6/18/21
Roku Channel Is Seeing Staggering Momentum, The Motley Fool, 6/19/21