nScreenMedia OTT multiscreen media analysis

CandW discuss Roku as a bellwether for the streaming industry

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Roku delivered a healthy Q1 2019, performance, and the market rewarded the company with a 28% increase in the share price.[1] The IAB also said online video ad growth was strong in 2018 but is Roku ad revenue growth keeping pace?

Chapter 1: Roku Q1 2019 results (1:10)

Roku showed strong growth in active accounts, average revenue per active user, and in streaming hours delivered. Active users are streaming for 3 hours and 20 minutes a day. Revenue is on target to exceed a billion dollars in 2019 as platform revenue continued to surge ahead driven by advertising.

Chapter 2: Is The Roku Channel competing with partners? (6:45)

Analysts on the quarterly call expressed concern that The Roku Channel was competing with partners like Pluto TV. Anthony Wood, the Roku CEO, was adamant that growth in the market was good for all participants and that Roku didn’t unduly benefit because of its position in the market.

Chapter 3: Is ad revenue growth keeping pace with the market? (8:50)

I struck a note of concern. I noticed that the year-over-growth in ARPU, which mostly comes from advertising, has been decelerating for the last few quarters. For example. ARPU increased by 50% YoY in Q1 2018 but only managed 26% in the quarter just ended.

Chapter 4: IAB digital growth numbers (10:00)

According to the IAB, video ad revenue was up 37% in 2018, with the most significant portion occurring in Q4. Roku’s platform increased much faster than that. However, Roku does not reveal what part of platform revenue comes from advertising. So, ARPU is the only measure that can provide us guidance.

Chapter 5: Market dynamics are in Roku’s favor (13:00)

The streaming market continues to expand rapidly with major ad-free and ad-supported service launches slated for the next 12 months. As well, consumers are spending much more time streaming and seem likely to increase consumption even more. Roku seems well positioned to benefit as the market continues to expand.

Chapter 6: Amazon is copying Roku’s model (17:20)

Amazon launched an ad-supported video service and is licensing Fire TV to smart TV manufacturers. Imitation is the sincerest form of flattery!

Chapter 7: International and mobile are key (18:50)

Roku executives have stated they will expand internationally and that The Roku Channel will launch on mobile. Both moves are critical to the continued success of the company, yet executives declined to give any details of progress on either front.

[1] As measured at 4PM on may 9th, 2019


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