In its earnings call last week, streaming platform Roku announced that it had surpassed 60 million accounts across its devices and smart TVs, but that the company’s gross margin continued a decline at the end of 2021 that had been seen across recent quarters, primarily due to supply chain issues that were preventing the further expansion of their reach via hardware sales.
Later in the week, it was reported that Roku was exploring the possibility of taking out the middle man and manufacturing televisions themselves to mitigate some of the supply chain complications that have been slowing down growth.
However, in the earnings call, Anthony Wood – Roku’s founder and chief executive officer – continued to talk about the company’s current business model of serving as an operating system for smart TVs built by outside manufacturers.
“The Roku operating system is poised to gain further market share as TVs shift away from costly proprietary operating systems,” he said. “We expect manufacturers who want a best-in-class operating system to choose the Roku OS, which is purpose-built for TV.”
One of the benefits that Roku provides consumers, according to Wood, is the Roku Channel. The CEO says that due to the rise in free ad-supported streaming television (FAST) the Roku Channel has moved into a top-five position on the platform amongst U.S. customers just four years after launch.
“The Roku Channel … reached households with 80 million people in the [fourth] quarter, and it’s just been a big driver of our ad business,” Wood said. “This success is a result of combining a robust content portfolio with our ability to send consumers to the Roku Channel with superior content marketing and advertising features.”
The streamer’s executives believe that the Roku Channel is well-positioned to drive both ad revenue and viewership for the company.
Roku Channel
The Roku Channel is a free live TV streaming service that provides 350+ live linear streaming channels and more than 80,000 free movies and TV shows. The library contains entertainment from several different decades, including some major hits.
“In terms of some of the specific items that we’ll talk about around the Roku Channel, in particular, one of the things that we’ve talked about recently is this flywheel effect,” Roku chief financial officer Steve Louden said. “That flywheel is driven by content, which is driving increased reach and viewership, which then allows us – since it’s primarily AVOD supported – to sell more ads based on the supply from the Roku Channel. Really the scale of the Roku Channel in that growth trajectory is allowing us to invest more in the content.”
Wood noted that while customers spent an estimated 45% of their TV-watching time doing so via streaming, only 18% of television advertising budgets had made it to the streaming side of the industry in 2021. Of course, that disparity can partially be attributed to the fact that Netflix, the world’s largest streaming service, does not have any advertising, and that many of the most popular streamers allow customers to pay for an an ad-free tier.
However, Wood is likely correct in his assumption that television advertising will continue to move more and more towards streaming over the next years and months, especially as FASTs become increasingly popular in American households.
Roku
Roku is a streaming device that can be used to watch Live TV Streaming Services and On Demand Streaming Services.
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