nScreenMedia OTT multiscreen media analysis

Comcast Flex, Facebook Portal TV pose no threat to Roku

The Roku Channel Premium

The streaming media player (SMP) market became even more competitive and complicated this week. Facebook threw its hat into the ring, and Comcast started giving away the Flex box to broadband subscribers. Financial markets punished streaming media player (SMP) leader Roku by slashing its stock price by 30%. However, the truth is neither Comcast nor Facebook poses much of a threat to Roku growth.

Facebook Portal TV

Facebook announced that it would add a box to connect to a TV to its line of Portal devices. In some respects, Portal TV is a simple continuation of the communication theme of the product line. The $129 device includes a camera and microphone and support for video calling using Facebook Messenger and Whatsapp. However, Portal TV has broader ambitions.

Facebook is rumored to be in talks with Netflix, Disney, and others about including their SVOD services on the device. It likely will bring free-online TV providers like Pluto TV, Newsy, and Red Bull TV since it already has relationships with them for Oculus TV available on Quest and Oculus headsets.

Comcast Xfinity Flex box

Comcast introduced Xfinity Flex as an online TV aggregation play earlier this year. Xfinity broadband users could get the Flex box with voice remote from $5 a month. Many major online TV providers are available on the Flex box. At the time, nScreenMedia said charging for Flex was a non-starter with customers. Why pay Comcast for something a streamer can get for free with the purchase of a $30 Roku or Fire TV stick.

Comcast seems not to have had many takers for Flex at $5 per month. The company announced this week that Xfinity broadband users could get the box and service for free. Each additional TV requiring a Flex box costs an extra $5 a month.

Markets see a threat to Roku

After the news of Comcast removing the charge for Flex on the heels of the Facebook Portal TV announcement, financial markets saw a significant danger to Roku. The SMP market leader’s stock plummeted 30%, to close out the week at $108. Even after Roku announced enhanced versions of the Roku Express and Roku Ultra with no accompanying price increase the stock price did not recover.

The threat to Roku’s business the financial markets are concerned about is two-fold. Firstly, sales of its boxes and sticks could take a hit at the hands of Flex and Portal TV. Secondly, falling SMP sales could impact Roku’s large and growing advertising business. Fewer device sales mean slower growth of active users and viewers of its ad-supported The Roku Channel.

Market fears are overblown

However, there are reasons to believe the financial market’s concern is overblown. Both Portal TV and the Flex box will not have anything like the number of services available through Roku. For example. Flex doesn’t have Hulu or CuriosityStream. As people look beyond Netflix and Amazon Prime Video, they will be forced to find another device to watch. Once that happens, they will stop using Flex and Portal TV for video streaming.

Households that stream to connected TV by device type 2017-2019

As well, Roku powers more smart TVs than any other TV OS. Moreover, signs are that smart TVs are becoming the go-to devices for streaming viewers. According to comScore, smart TVs are catching SMPs as the preferred way to watch streaming video on TV. Thirty million Wi-Fi households use a smart TV, up 24% from last year. Thirty-seven million use an SMP, but that number increased only 9% on the previous year.

Why it matters

Two new market entrants to the streaming media player business made Wall Street nervous about Roku’s future.

Market fears are overblown.

The new devices will lack many online TV services, blunting their appeal.

Roku is a crucial supplier of smart TV OSs, and smart TV users are growing fast and likely will overtake streaming media player users soon.

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One Comment

  1. Very informative. I agree 100% on the Portal front.

    But Flex, couldn’t they simply add new App services over time? That move to make the box and the service free feels like a game-changer. And, part of a larger wave of free streaming TV services (with or without ads.) Not only the FASTS but Locast, and even a crazy new first-of-its-kind free-to-consumers satellite company that is launching in the US.

    So, I see these as having different impacts.

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