Roku CEO Won’t Discuss Netflix Merger Rumors, Says All TV Advertising Is Moving to Streaming

Market speculation about a possible corporate merger involving erstwhile streaming video partners Roku and Netflix may continue to generate media buzz, but Roku CEO Anthony Wood is mum about the topic.

“In terms of Netflix, obviously I can’t comment on rumors,” Wood told CNBC’s Julia Boorstin June 22 from the Cannes Lions film festival in France.

It’s an interesting choice of words considering Wood wouldn’t dispell the scuttlebutt either. The executive was Netflix’s short-lived head of internet TV in the early 2000s as the by-mail DVD movie rental service was readying to launch the subscription streaming video (SVOD) industry.

Instead, Wood launched Roku with seed money from Netflix to manufacture streaming devices — including the “Netflix Player” in 2008 — that enable consumers to connect the television to the internet. Fast-forward to the present and the SVOD market — led by Netflix — is embracing advertising as the standalone subscription video business plateaus.

Roku, through its pioneering ad-supported The Roku Channel is now a major player in the AVOD and free ad-supported streaming TV market with more than 60 million active accounts. The Roku Channel was a top five channel on the Roku platform in the U.S. by reach and engagement through the most-recent fiscal quarter.

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For the first time, TV streaming devices surpassed legacy pay-TV devices (set-top devices and DVR) in weekly reach in the United States, with 65% of adults aged 18-49 streaming TV compared with 63% watching legacy pay-TV, according to Nielsen.

“Our ad business has been growing like gangbusters,” Wood told Boorstin.

Indeed, in Q1 the top 10 broadcast TV advertisers increased spend on Roku nearly 80% year-over-year, while spending 7% less on legacy pay-TV, according to Roku.

“All television is going to be streamed. That means all TV advertising is going to be streamed,” Wood said.

The executive contends the biggest impediment to growth for Roku — and all streamers — is that marketers’ mindsets are still used to spending dollars through legacy pay-TV.

“The economy is causing to marketers to think harder about how they spend their money, how they can be more efficient,” he said.

When asked how Netflix’s pending foray into ad-supported VOD could impact Roku, Wood deflected, saying that the evolution of TV has been driven by advertising.

“Ads are great because they bring down the cost for consumers,” he said. “We’ve been a big partner, we have a great relationship with Netflix for a long time. But we have great relationships with a lot of streaming content companies whether its Disney, YouTube or Hulu.”

Bob Chapek: Direct-to-Consumer is ‘My Sweet Spot’

New Disney CEO Bob Chapek, who was abruptly named to the position Feb. 25, with former CEO Bob Iger transitioning to the executive chairman role, says he’s well-equipped to run the global media brand.

Speaking with Julia Boorstin on CNBC’s “Fast Money,” Chapek said he plans to take the “strategic pillars” Iger established over the past 15 years and further implement them into the direct-to-consumer market.

At the same time, Chapek, who most recently headed Disney’s Parks & Recreation unit, including currently shuttered (due to the COVID-19 virus) amusement parks Disney Shanghai and Disney Hong Kong, said he would be looking “around the corner” for any “disruption” that might be going on in the marketplace that would “necessitate a fresh look.”

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“But right now, the course that Bob has laid is one that we fully intend to follow and I think will pay dividends for our shareholders for years to come,” Chapek said.

The longtime executive said ongoing concerns about COVID-19 underscore a “function of our consumer demand” for the Disney product. Chapek said Disney would weather the storm and emerge from the challenge as it has other setbacks.

“[The] affinity for the brand and our storytelling will way outlast any short-term blip that we have from Coronavirus,” he said.

When asked about ongoing cord-cutting among pay-TV subscribers and the growth of over-the-top video distribution, Chapek said his background in home entertainment and consumer products would serve well dealing directly with consumers.

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“It’s not ironic that our strategy for the media business now is a direct-to-consumer business, where we have the one-on-one relationship with the customer without having a lot of middlemen in between,” he said. “That’s my sweet spot, and I think that’s something I can leverage now throughout all my experiences, not even Disney but even before Disney, in terms of figuring out how we take the data, the information, the technology and, once again, our storytelling right direct to the consumer so that we can take the great equities that we have and continue to build those for our shareholders.”