Roku CFO: Advertisers Still Slow to Embrace AVOD

Roku ended the recent fiscal period with more than 61 million account households worldwide, with the majority of those households in the United States. That scale has prompted Roku to ramp up spending on original content it greenlights, licenses and streams via The Roku Channel, the company’s ad-supported VOD platform.

While Roku is the No. 1 gateway to third-party streaming services on the internet, the consumer electronics manufacturer of Chinese-made televisions and soundbars remains challenged attracting television advertisers, according to CFO Steve Louden.

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Roku CFO Steven Louden and Laura Martin, senior media analyst with Needham

Speaking May 17 on the virtual Needham Technology & Media Conference, Louden said around 18% of legacy TV marketing budgets have moved to the Roku platform, compared to 50% of TV viewers. The executive sees the imbalance as an opportunity.

“Advertisers are actually lagging the consumers, so there is more [advertising] budget[s] to be had,” Louden said.

Specifically, the executive said that as The Roku Channel generates more reach and user engagement, the proposition to advertisers to move their budgets from legacy TV broadcast to streaming becomes more compelling.

“That engagement will happen over time,” Louden said.

When asked why ad-supported video streamers are subjected to the same ads repeatedly, unlike broadcast television, Louden said the AVOD market remains locked for the time being in the “wild west” in terms of user engagement, with each streaming service determining ad frequency cap, or number of times a targeted ad is shown to users.

Louden countered that The Roku Channel subject viewers to 50% of the ads they would see on broadcast television, while also trying to limit repetition of a single ad spot. Louden didn’t disclose what the ad load on The Roku Channel is.

“Not everybody has the same view about [ad frequency],” he said.

Regardless, as competitors Netflix and Disney+ ready less-expensive ad-supported subscription options, Louden said the move underscores the appeal of The Roku Channel, and viewer willingness to offset watching ads with a lower-priced entertainment choice.

“When we started The Roku Channel, most of the world had declared free ad-supported TV dead, and SVOD was going to be the only solution,” Louden said. “We’re very happy that the thesis we have [about AVOD as the future] has been proven correct. When there is more competition [among AVOD services], that’s good. We, as the leading platform in terms of engagement, we feel we have the best media and entertainment tools for content publishers.”

Roku Reportedly Eyeing 20% Stake in Starz

Roku has reportedly partnered with Apollo Global Management to submit a bid for a 20% stake in Lionsgate-owned multiplatform digital distributor Starz. Roku, which co-launched the subscription streaming video-on-demand market with Netflix in 2008, has been looking to up its presence as a digital content distributor, in addition to streaming gateway for third-party streaming services.

The Wall Street Journal, citing sources, said Roku and Apollo are looking to act on Lionsgate’s decision to spin-off Starz, which the studio/distributor acquired for $4.4 billion in 2016. Apollo acquired Redbox from Outerwall for $1.6 billion in 2016, before spinning the kiosk vendor off last year to SPAC Seaport Global Acquisition.

Lionsgate, which believes Starz is undervalued, has been busy licensing digital rights to original and catalog content to The Roku Channel and Amazon Freevee, previously partnered with Roku for original movie, Zoey’s Extraordinary Christmas, which Lionsgate produced.

Starz ended 2021 with about 20 million subscribers. Lionsgate in March sold its majority stake in subsidiary Starz Play Arabia for an undisclosed amount. The service has about 2 million subscribers.

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Apple Music Streaming Service Now on Roku Platform

Roku May 2 announced that the Apple Music streaming app is now available globally on the Roku platform. Subscribers can stream on any Roku device, including streaming players, Roku TV models, and the Roku Streambar Pro. Current Apple Music subs (78+ million) can access the app with their existing log-in credentials. The app will be available to download later today.

Roku users can sign-up for Apple Music today through the Roku channel store for a one-month free trial. After the trial, Apple Music plans are available for purchase starting at $9.99 per month.

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Roku users can access more than 90 million songs and 30,000 curated playlists. In addition, Roku users with an Apple Music subscription can live stream today’s hits, classics, and country with the award-winning Apple Music Radio, as well as listen to songs, albums, and playlists from their own music library. The Apple Music app also allows users to watch music videos in 4K on compatible devices and sing along to their favorite songs with time-synced lyrics. Subscribing users will also gain access to Apple Music original shows, concerts, and exclusives, as well as personalized recommendations.

Roku Posts $23.5 Million First-Quarter Fiscal Loss, Adds 1.1 Million Active Accounts

Fueled by consumer trends that show more people using streaming devices than legacy pay-TV devices in the U.S., Roku April 28 reported a gain of 1.1 million active user accounts to 61.3 million for the first quarter (ended March 31). That’s up 14% from 53.6 million active accounts in the previous-year period. However, Roku gained 2.4 million active accounts in the prior-year period.

Roku attributed the slowdown in active user growth in part to an end to government stimulus checks issued to consumers during the pandemic.

Total streaming hours increased 14% to 20.9 billion, up 14% from 18.3 billion hours in the previous-year period. Streaming device revenue declined 19% to $86.9 million, from $107.7 million a year earlier.

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Overall, the company reported a net loss of $23.5 million on revenue of $733.7 million, which compared with net income of $75.8 on revenue of $574.2 million last year.

Roku’s ad-supported branded “The Roku Channel” remains a top five channel on the Roku platform in the U.S. by reach and engagement.

“We have delivered solid performance in a challenging operating environment and expect that we will continue to navigate through macro headwinds, including inflationary pressures, geopolitical conflict, and supply-chain disruptions,” Roku said in the shareholder letter.

Ampere: AVOD Services Grew Original Content by More Than 100 Titles in Past Two Years

Major advertising-funded VOD platforms have joined the original content goldrush, with services such as Roku, Tubi and IMDb TV collectively releasing more than 100 new original titles in the past two years, according to a new report from Ampere Analysis.

Also, U.S. AVOD services with the highest investment in original content have seen the largest growth in usage, according to Ampere. Tubi, which has launched 20 original titles, saw monthly usage grow by 164%, by Ampere’s estimates, between Q3 2020 and Q3 2021.

AVOD originals cannot compete with titles from larger SVOD services, which are also creating more originals. AVOD platforms can’t match the billions of dollars spent by the leading SVOD players in the creation of original content, according to Ampere. AVOD services are smaller in scale, and the advertising business model will struggle to justify the sorts of multi-million-dollars-per-hour content investments which the leading SVOD players have applied to new flagship titles. However, according to Ampere’s analysts, one fundamental calculation for investing in original content remains true for both service types: As platforms expand globally, original content investments scale well. Investing in originals is a consistent way to offer exclusive content worldwide without incurring additional licensing costs in each market, according to Ampere.

Additionally, while AVOD originals do not yet provide enough of a draw to pull viewers away from larger SVOD platforms entirely, they do differentiate services within the increasingly fragmented AVOD market, and offer a reason for viewers to choose one service over another, according to Ampere.

Roku has invested more extensively in original-branded content, in part because of its acquisitions of Quibi’s content assets and its focus on low-cost-per-hour content. Of the six most popular AVOD platforms in the United States, Pluto TV is the only one not to have invested meaningfully in original programming — although it is in a position to take advantage of the programming slate of its parent company — Paramount — and outside the United States has become the temporary home for hit Paramount originals such as “Star Trek: Discovery.”

“Despite AVOD originals not having an impact in the wider streaming market — largely limited by their current lack of reach — AVOD platforms should not stop their investment,” said Joseph Hall, analyst at Ampere Analysis, in a statement. “Our analysis shows that the AVOD platforms with the highest growth in use since Q3 2020 are those with the most released or announced original programming.”

CNN+ Subscription Streaming Service Launches on Roku Platform

CNN+, the upstart subscription streaming video service from Warner Bros. Discovery’s CNN operation, is now available in the U.S. on the Roku platform — a must-have conduit to the internet for third-party apps.

Roku users will be able to download the CNN+ app through the Roku channel store, which will contain both the subscription streaming service and access to the existing “TV everywhere” option for pay-TV subscribers, including the live TV feeds of CNN, CNN International and HLN.

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CNN+, which launched March 29 priced at $5.99 per month or $59.99 per year, features upwards of 12 live daily shows, new CNN+ Original Series and a library of more than 1,000 hours of programming from the CNN Original Series and CNN Films teams. Additionally, the streamer’s Interview Club feature available on desktop, mobile and tablets, enables subscribers to drive the conversation and be part of the story. The full schedule of live, daily and weekly series on the app is available here.

Canadian TV Joins Roku Platform

Roku April 6 announced the launch of Canadian TV (CTV) on its streaming platform, in a continued partnership with Canada’s Bell Media.

Ranked as the No. 1 TV streaming platform in Canada, according to a recent study conducted by the Hypothesis Group, Canadian Roku users will now have access to live and on demand programming from CTV on the streaming player or Roku TV.

Launching on the Roku platform gives users across Canada access to live and on demand programming available through the CTV app, including original shows, series and movies from across CTV Comedy Channel, CTV Drama Channel, CTV Sci-Fi Channel and CTV Life Channel.

“As the No. 1 TV streaming platform in Canada, we are committed to expanding Roku’s Canadian content availability,” Mary-Anne Taylor, head of content distribution, Canada at Roku, said in a statement.

With more than 60 million active accounts globally, Roku remains a must-have gateway to the internet for third-party streaming video platforms.

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Roku Reaches Multiyear Streaming Agreement Extension With Amazon

Roku April 4 announced it has reached a multiyear extension with Amazon for distribution of the latter’s streaming platforms. Customers can continue to access the Prime Video and IMDb TV apps on their Roku devices. Terms of the agreement were not disclosed.

With more than 60 million active accounts globally, Roku remains a must-have gateway to the internet for third-party streaming video platforms. The lack of an agreement with Roku hampered the 2020 rollout of WarnerMedia’s HBO Max, negatively impacting subscriber signups. A subsequent agreement in later that year helped jumpstart subscriber additions, with HBO and Max ending 2021 with almost 74 million combined subs.

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Roku Launches New Operating System With Enhanced Personalization Features

Roku March 22 announced that its new OS 11 operating system will start rolling out to Roku devices in the coming weeks. Roku OS 11 brings personalization to the forefront with the launch of Roku Photo Streams — giving users the ability to share digital photos. Additionally, Roku OS 11 offers expanded content discovery menu options, auto speech clarity, new sound modes, and an improved mobile app, among other features.

Roku Photo Streams enables users to create a personalized screensaver using their own photos. To do so, users upload images directly to their Roku devices through their desktop or mobile phone and set them as screensavers. Users can also upload and share Streams with other Roku users. Once a Stream is shared, friends and family can also add their photos to the Stream, creating a shared album.

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“We recognize not everyone interacts with their TV in the same way,” Gidon Katz, SVP  of product and experience at Roku, said in a statement.

Other Roku OS 11 features include automatic speech clarity setting, which identifies and amplifies dialog. New sound modes for Roku Streambar and speakers, including standard, dialog, movie, music, and night.

Roku also expanded the A/V sync with a calibration tool within the Roku Mobile app, syncing audio with the action on the screen. This feature is available when you have a player or Streambar device connected to the Roku mobile app and is accessible within the settings menu.

The operating system also updates movies and TV shows to stream from a variety of third-party channels, including those users most frequently interact with.

In January, Roku added a Live TV Zone on the Home Screen Menu giving users access to free live and linear content from The Roku Channel as well as cable alternatives, including Hulu, FuboTV, Philo, Sling TV and YouTube TV, among others. With Roku OS 11, viewers can see their recently watched live TV content and discover the latest in local and national news, sports, movies, and more in the Live TV section now located on the home screen menu.

The Roku Voice features simplifies device setup and channel login for supported apps by allowing users to enter email, password, and PIN information with their voice. With OS 11, voice-enabled keyboards will be available in Spanish, German and Portuguese in the U.S. and supported countries.

Finally, the free Roku OS 11 mobile app provides users with additional information about where to stream movies and TV shows, highlighting which channels are streaming the content for free or where it can be streamed within existing subscriptions. The new content details on the mobile app also show visual images of the cast and crew to assist with choosing what to watch.

Roku Bows Advertising Watermark Technology

Roku Feb. 23 announced the launch of an advertising watermark designed to help advertisers and publishers validate the authenticity of video ads originating on the SVOD pioneer’s platform. Roku says the technology gives marketers the confidence that their advertising spend is reaching real Roku users.

According to Roku, so-called “device spoofing” can occur when scammers pretend that a desktop or mobile device is a TV streaming device. The advertising watermark integrates with the Roku operating system to automatically verify publisher ad requests and impressions so that advertisers know they are reaching genuine Roku users.

While ad spoofing in TV streaming remains rare, Roku believes this new technology will help the industry deter bad actors and improve ad effectiveness.

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“We are uniquely positioned to help the industry preempt device spoofing,” Louqman Parampath, VP of product management at Roku, said in a statement. “This is powerful and free technology will help advertisers accelerate their shift to TV streaming with even more confidence.”

Ad technology providers integrating the advertising watermark at launch include Basis Technologies, Google, HUMAN, Innovid and Magnite. Publishers using the watermark include Discovery and Fox.

“[The technology] assures our advertiser clients that they are buying genuine Discovery inventory on Roku devices,” said Bill Murray, VP of programmatic solutions. “We’re excited that Roku has brought its data, operating system, and ad technology together to easily prevent ad spoofing.”