Roku Adds 3.7M Accounts to Reach 60.1M, Gross Margins Crater Because of Supply Chain
Roku reached a new high in active accounts in Q4 2021, but that success was offset by an absolute disaster on the device side of the company as gross margins fell for the fourth consecutive quarter to -31%.
Roku did pass 60 million accounts in Q4, up 8.9 million accounts from the year prior. In 2021, users consumed 73.2 billion hours of content on through Roku’s services. That makes it the #1 TV streaming platform in North America. The Roku OS powers more than one-third of all Smart TVs sold in the U.S.
The company announced that Roku-powered TV unit sales fell below pre-COVID 2019 levels in Q4, though standalone Roku devices sank just 4% year-over-year.
While investors have soured on the stock, many may not realize that Roku is an advertising company in the guise of a device manufacturer. It’s the OS and user data that are the real gold mine. Roku reported its fastest-growing ad product in Q4 was targeting using the platform’s first-party data. The Roku devices are simply a method to harvest user data.
Indeed, the platform revenue was up 49% year-over-year ($703 million) while the player revenue shrank 9% in the same span ($161 million). Roku could raise the price of its devices, but then it would risk losing out on new users and their data. As platforms like Apple tighten user privacy, the ability for a company to reach a user directly becomes more valuable. Roku reports an average of 3.6 hours of use each day among its active accounts.
Business Insider reports Roku is considering a leap into manufacturing their own branded TV sets. But with supply chain concerns not easing anytime soon, that seems like a difficult leap at the moment. Company executives refused to comment on the rumor during today’s earnings call.
While the company would not comment on speculation, a source told Insider that the expansion into TV manufacturing has been a part of Roku’s plans for over a year. “The analysis has been done. They recognized that owning the last bit of branding made a lot of sense, particularly if you are going into content,” the source said.
In December, Roku finally ended a months-long feud with YouTube TV, reaching a new agreement for the two sides to work together for the next several years.
The Roku Channel is a free live TV streaming service that provides 300+ 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.
The service also made a splash by the acquisition of the Quibi library, now presented as Roku Originals. More original content is set to follow.
Users can add premium subscriptions to services like Showtime, STARZ, and AMC+ that can be accessed within the Roku Channel ecosystem.