eResearch | Over the past 3 years, Roku, a tech company that provides a platform to aggregate streaming services such as Netflix, has captured the largest number of devices utilizing its operating system.
According to Strategy Analytics, Roku powers 41 million devices in the U.S, 36% more devices than its next closest competitor, and has grown to over 30 million active users, which is catching up to Netflix’s 60 million subscribers.
In 2008, Roku Inc. launched the Roku Player (“Player”), an internet aggregator for streamed media content, to provide an easier way for people at home to link media streaming services and channels to the TV. There have been seven generations of the Player, with the most recent having capabilities to search for film titles under paid services such as Amazon Video, HBO Go, and Netflix, as well as free ad-driven services such as YouTube.
In October 2017, to compete within the growing media streaming industry, Roku strategically launched its own streaming platform, The Roku Channel, which through an ad-revenue sharing model, provides licensed content from partners including Lionsgate, Paramount, Sony, Warner Bros, and MGM. Unlike Netflix, Roku does not create its own content.
The main goal for Roku is to scale its platform, increase the number of active users, and then to build a successful ad-driven streaming platform business model through data analytics. Roku believes that it will differentiate its platform from competitors through leveraging proprietary data to (1) create predictive models to choose which films to license, (2) use machine learning for content recommendations, and (3) use data driven marketing tools to accurately target advertisements.
Key Financial Highlights – Q2/2019
Revenue grew 59% to US$250 million compared with US$157 year-over-year, and beat analyst expectation of US$224 million, mainly due to Platform revenue growth of 85%, which is now the main revenue stream accounting for 67% of total revenues compared with 57% the year prior.- Net Income loss of US$9.3 million compared with a Net Income of US$526 thousand year-over-year, mainly due to a 50% increase in R&D expenses and a 68% increase in SG&A expenses.
- Gross margins decreased to 45.7% compared with 49.6% year-over-year.
- Cash and cash equivalents increase to US$375 million compared with US$155 million year-over-year
- Active accounts passed 30 million, with a net addition of 1.4 million accounts quarter-over-quarter.
- Average revenue per user increased to US$21 compared with US$19 quarter-over-quarter.
- Streaming Hours increased to 9.4 billion hours compared with 8.9 billon quarter-over-quarter.
In Q2/2019, Roku beat multiple top and bottom-line estimates from analysts, which has attracted investors who were following the success of Netflix as well as Disney who is expected to launch its own streaming platform, Disney +, in November 2019.
Roku increased its 2019 midpoint revenue outlook by 40% to US$1.08 billion, which would represent a 46% growth year-over-year. As the media streaming landscape becomes more and more competitive, it will be interesting to see how Roku does as it starts to stream its own licensed content.
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Roku, Inc. (NASDAQ: ROKU; LSE: 0KXI; DB: R35)
- Headquartered in California, United States, Roku is a technology and media company that partners with different media services to aggregate content on its platform and to make it easy to access with internet on devices such as TVs and phones.
- Roku currently trades at US$168.20 with a market capitalization of US$19.5 billion.
Netflix, Inc. (NASDAQ: NFLX; LSE: 0QYI; DE: NFC)
- Headquartered in California, United States, Netflix is a media-services provider with over 140 million paid subscribers for their streaming platform.
- Since 2012, in preparation for competition to their streaming platform, Netflix has taken a more active role as a producer and distributor for both movies and TV shows.
- Netflix currently trades at US$290.74 with a market capitalization of US$127.2 billion.
Walt Disney Co. (NYSE: DIS; LSE: 0QZO.L; DE: WDP)
- Located in California, United States, Walt Disney is a diversified multi-national media conglomerate that is known for its film studio division which includes Walt Disney Studios, Pixar, Marvel Studios, and Lucasfilm.
- On March, 2019, Walt Disney acquired 21st Century Fox for US$52.4 billion, to add content to their up and coming streaming platform, Disney+.
- Walt Disney currently trades at US$137.40 per share with a market capitalization of US$247.5 billion.
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