Roku CFO: ‘Trolls World Tour,’ ‘Scoob!’ Woke Up ‘Sleepy’ TVOD Biz

As co-creator with Netflix of the subscription streaming video market, Roku has driver’s seat view of not only the over-the-top video market, but facilitating third-party transactional VOD as well.

Speaking Sept. 15 on the KeyBanc Future of Technology Conference, Roku CFO Steve Louden said the company had a “banner quarter” for the fiscal period ending June 30, with strong SVOD, premium VOD and transactional VOD revenue shares — the latter driven by Universal Pictures Home Entertainment’s Trolls World Tour and Warner Bros. Home Entertainment’s Scoob!.

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“That basically was precipitated by the theaters being closed [due to the coronavirus pandemic] and studios coming out with direct-to-consumer offerings,” Louden said. “It kind of woke up an otherwise sleepy TVOD segment.”

Indeed, consumers spent an estimated $2.99 billion on digital transactional entertainment in the first six months of this year, up 25% from the $2.25 billion spent in the first half of 2019, according to DEG: The Digital Entertainment Group. Digital sales of movies, series and other filmed content was up 57% in the second quarter and 33% in the first half, while transactional streaming, in which consumers rent a program for 48 hours, was up 50% in Q2 and 33% in the first six months of the year.

Louden said streaming hours spiked dramatically in the first phases of the lockdown and remain above the pre-pandemic levels.

When asked about the omission of HBO Max and NBCUniversal’s Peacock streaming services on the Roku platform, Louden said it comes down to economics. Roku doesn’t charge end-users to access the platform; yet without it many consumers wouldn’t willingly gravitate toward a particular OTT brand, according to Louden.

Analysts contend non-placement on the Roku platform has hurt Max and Peacock generate subscribers. Comcast just disclosed that Peacock has generated 15 million subscribers since launching in July.

Disney’s rollout of the Disney+ SVOD platform, which saw the media giant “lean heavily” on Roku during its initial launch, underscores the platform’s importance in the OTT video ecosystem, according to Louden.

“We played a good part in getting them a rapid growth in audience and…when they launched Hamilton, we were the number one platform for viewership,” he said. “I think they’ve leveraged pretty much all our audience development capabilities.”

OTT.X Summit Speakers Talk FAST (Free, Ad-Supported Television)

Free, ad-supported television dominated the discussion during the OTT.X summit’s opening-day keynote panel.

Known by the acronym FAST, the market certainly is in growth mode. Media heavyweights ViacomCBS and Comcast Corp. have acquired Pluto TV and Xumo, respectively, while Comcast’s much-ballyhooed Peacock streaming service also will have a free, ad-supported component.

And as Media Play News reported earlier this week, new data from eMarketer suggests AVOD revenue will grow more than 25% this year compared with 2019.

The AVOD market — spearheaded by The Roku Channel, Disney-owned Hulu, Peacock, Redbox TV, Amazon’s IMDb TV, Pluto TV and Fox Corp.’s Tubi — saw ad revenue skyrocket 31% to $849 million in the most-recent quarter, according to MoffettNathanson Research.

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“It’s something I’m really excited about — this is the thing that’s really hot,” moderator David Bloom, a tech journalist and consultant, said during the panel on Sept. 1. (The OTT.X summit continues through Sept. 3; click here to register.)

Anthony Layser, VP of content partnerships at Xumo, agreed.

“Things have changed so quickly over the last couple of years,” he said. “I joined Xumo in 2017 and I think at first there were some things that felt a little bit like a gimmick — you’re starting to string together types of content into a linear experience.

“And then I really got a sense, after a few months in, that what’s old is new again. People don’t necessarily want to spend all night searching through box art; they may be interested in a very specific series they are comfortable with — maybe it’s nostalgia, maybe it’s lifestyle.”

The FAST market, he said, “is always changing and it’s exciting to come to work every day and look at data and say, ‘Wow, look at how this piece of content we licensed years ago is taking off.’”

Erick Opeka, president of Cinedigm Networks, said his company over the past 18 months has sought to build “a nice portfolio of premium FAST and AVOD services to complement our four niche subscription services we still operate.”

“We got out of the real heavy, direct-to-consumer side,” he said, “and now focus on what I call the classic model of third-party distribution. You get a lot of bang for your buck — you don’t have to spend a lot of money on marketing, and you can focus all your energy on content spend and everyone else handles all the rest. So it’s a good model. Where we really thought the growth for us was going to come was in the ad-supported space.”

Advertising spending, he said, is “completely disconnected from the consumption right now. If you look at the data coming out of Samsung, where 55% of all consumption on smart TVs is not with traditional environments — the trend is not going to reverse; it’s not going to suddenly swing back the other way, especially given that 265 million sets are sold annually that have linear and VOD baked in, not to mention hundreds of thousands of apps.”

With FAST, Opeka said, “consumers love the choice, they love getting tons of entertainment for free that they don’t have to pay for. A couple of years ago, Pluto really educated all of us. … People mistake linear being dead for pre-programmed, tuned-in being dead. But I think there’s a very different piece here. Leanback is not dead. There’s a real specific use case for a big chunk of the week where you don’t have a lot of time and don’t want to spend 30 minutes digging through thousands of titles or hoping the algorithm finds you. You just want something on while you’re having leftovers. What we’re really talking about is hand-curated, passive, feed-my-eyes, against active, algorithm-driven recommendations. There’s a place in the world for both.”

Tedd Cittadine, VP of content distribution at Roku, said, “There’s no secret we’re really excited and optimistic about the AVOD business in general. We started just over three years ago with the Roku Channel, and the reason we launched it is because our consumers were disproportionately searching for free content. We knew there was pent-up demand for it. And we’ve seen significant growth — it’s been growing faster than the platform as a whole.”

He noted that the “AVOD landscape has changed significantly” over the past few years. “It’s gone from many startup independents to Roku, CBS, Fox, Amazon, YouTube, Comcast”

He noted that as the business becomes increasingly competitive, there are “three key things that drive success.” One is access to a “huge audience.” “It’s incredibly expensive to acquire consumers,” he said. “If you don’t have that huge installed base you can market to and deliver your content to, it can be very challenging to build that audience.” Second is having a “one-to-one, proprietary relationship with data for consumers, and having access to that data to make your advertising more effective.” And the third, he said, is having a “large and successful, well-funded direct ad sales organization to take advantage of monetization opportunities.”

Also speaking on the panel was Andrea Clarke-Hall, VP of business development at Tubi, acquired by Fox in April. “If you take COVID and add an acquisition, it makes for interesting times,” she said. “But it has been awesome. It’s still very early days, but it seems to be a really great partnership. Fox has given Tubi tremendous autonomy, and I think what we’ve seen is continued announcements every week about leveraging Fox ownership to bring better and better content to Tubi.”

Cameron Douglas, VP of home entertainment for Fandango, gave a nod to the transactional side of the business, noting that stay-at-home orders, and the movie theater shutdown, during the coronavirus pandemic has given the business a boost.

“You feel like the last few months have brought transactional back,” he said. “People have discovered there’s new content, movies you might not have ever seen — like The Tax Collector, which has been No. 1 on our service for the last couple of weeks.”

Roku Bows ‘Express’ Streaming Media Device in Brazil

Roku Sept. 2 announced the launch of Roku Express, the company’s first streaming device in Brazil. The device is expected to be available in stores in the upcoming weeks at an average starting price of R$349.90 ($65). The Roku Express costs $29.99 in the U.S.

“We entered Brazil in January with the AOC Roku TV and are thrilled to expand our product offering with the Roku Express, which will bring an affordable streaming experience to even more consumers in Brazil,” Arthur van Rest, VP of international at Roku, said in a statement.

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The Roku Express can be connected to most traditional TVs via HDMI to convert it into a smart TV with Roku’s operating system, offering consumers an intuitive home screen and access to 100,000 movies and TV episodes via free and paid streaming channels.

Roku Express features and accessories include:

  • Easy and smooth HD and Full HD streaming;
  • High-Speed HDMI Cable;
  • Free Roku mobile app for private listening and more, available on both Android and iOS devices;
  • Roku Search to easily discover something great to watch by searching by title or actor to find shows or movies to watch;
  • A simple remote control to navigate streaming channels along with shortcut buttons to popular channels;
  • Automatic software updates to receive new streaming channels and features automatically without lifting a finger.

 

The Roku platform offers a streaming line-up of movies and TV episodes across 5,000 streaming channels for Brazil available in the Roku Channel Store. Consumers can access the streaming channels directly from the home screen of their Roku device. Popular channels include Netflix, Globoplay, HBO Go, Prime Video and Apple TV+. The company recently announced the arrival of cinema hub Telecine and Vix, a new free channel offering popular movies and TV series. In addition, users have access to music on Spotify and kids’ entertainment on channels such as PlayKids, BabyFirst and LooLoo Kids.

Roko helped launch the SVOD market in 2008 with a branded “Netflix player.”

Comcast Eyes Leasing X1 Software to TV Manufacturers

Comcast is reportedly considering licensing its X1 set-top box software to third-party consumer electronics manufacturers of smart televisions. Such a move would put Comcast in competition with Roku, Google and Amazon, among other tech companies affording TV manufacturers with Internet-connected consoles.

First reported by Protocol.com, citing sources familiar with the situation, Comcast engaged in initial discussions with TV manufacturers in January at the pre-COVID-19 CES confab in Las Vegas. The cable operator, which is slowly coming to grips with a changing pay-TV market — underscored by the departure of more than 815,000 subscribers through June 30 — currently licenses X1 technology for third-party set-tops to Cox Communications and soon Charter (Spectrum TV Plus).

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Roku cut its teeth licensing its operating system through set-top devices manufactured for the former 21st Century Fox’s NOW TV. Comcast now owns NOW TV through its acquisition of Sky from Fox. Samsung, one of the world’s largest TV manufacturers, has begun licensing its Tizen OS smart TV technology to third parties.

Comcast’s move into software licensing could be accelerating after attempts to sell NBCUniversal’s Peacock streaming service through the Roku platform fell through. Similarly to WarnerMedia’s HBO Max, Peacock is also not available on Amazon Fire TV.

Launched in 2012 as Comcast’s antidote to Netflix, Amazon Prime Video and Hulu, cloud-based X1 platform now represents about 60% of the cabler’s pay-TV subscriber base. Since then X1 offers subs access to Netflix and YouTube apps. Comcast also launched broadband-only Xfinity Flex online TV platform.

Netflix, Roku Close Near Record Highs on Wall Street

Wall Street continues its love affair with over-the-top video, sending shares of Netflix and Roku near record highs at market close on Aug. 26. Netflix ended trading at $547.53 per share, which was less than 0.003% off the record close of $548.73 set last month.

Roku closed at $164.28, which was just 3.3% off the streaming media device manufacturer’s all-time high of $169. 86.

Both stocks, which collaboratively created the SVOD market in 2008, slipped in early trading the next day, Aug. 27. As of 9:15 a.m. PT, Netflix was back down to $529.70, while Roku was at $161.

The gains came after both stocks received kudos this week from Wall Street firms, including Citigroup Research and Piper Sanders — the latter suggesting Netflix bested all streaming video services among survey respondents/subscribers once the COVID-19 crisis is over. In addition, individual analysts on Seeking Alpha praised the companies for their resilience during the COVID-19 pandemic.

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“Roku will be able to translate solid operational improvements into accelerating revenue growth and probably improving profit margins too,” Andres Cardenal wrote on Aug. 14 in a note underlying why he thinks the stock is undervalued.

Separately,  Vishesh Raisinghani considers Roku the “ultimate winner” of the streaming wars driven by surging user base and average-revenue-per-user (ARPU) doubling within the next few years.

“[Roku] isn’t perceived as a threat or a competitor by any of the content creators … [and is] “small enough to minimally annoy device manufacturers such as Amazon or Google,” Raisinghani wrote.

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Meanwhile, Beulah Meriam K, writing on Seeking Alpha, said Netflix’s ongoing content gains trump ARPU and sub growth. The analyst contends the promotion of Ted Sarandos to co-CEO underscored the company’s faith in original content separating itself from the competition.

“The first sign that ‘content is, indeed, king’ is the fact that Sarandos has been [promoted],” Meriam K wrote on Aug. 18. “Few [competitors] focus on the content side of things; and, at the end of the day, isn’t that the real growth engine? It’s fine to look at the effects once in a while but, without getting to the underlying cause, it’s merely mathematical probability and error-prone projections.”

Roku Firing on All Cylinders During Pandemic

With the coronavirus pandemic throwing conventional entertainment consumption on its ear, streaming video device pioneer Roku has emerged a star on Wall Street as increasing numbers of consumers migrate to over-the-top video.

Roku, together with Netflix more than 12 years ago, helped create the subscription streaming VOD market. It now markets a line of Chinese-made smart televisions, in addition to a branded operating system for third-party consumer electronics. The San Jose, Calif.-based company operates an ad-supported VOD platform, The Roku Channel, and boasts more than 40 million platform subscribers.

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In its most-recent fiscal period, Roku saw revenue surge 41% to $43 million, with streaming hours skyrocketing 65% to 14.6 billion. Average revenue per subscribers rose 18% to $24.92 — underscoring the fact a lot of people use Roku to access third-party streaming services such as Netflix, Disney+, Amazon Prime Video and Hulu.

Last Friday, Roku joined Apple and Google in distributing the Sept. 4 premium VOD (dubbed “Premier Access” by Disney) debut of the much-delayed live-action film adaptation of Mulan.

Citigroup Research analyst Jason Bazinet, in an Aug. 26 note, believes Roku will increase its platform sub base to 125 million subs by 2022, with revenue per active account growing from $23 in 2019 to $32  in the next two years.

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“In the U.S., we think there are just two firms: Netflix and Roku,” Bazinet wrote. “Their business models couldn’t be more different. But, the fate of the equity we suspect is similar. Both turn on sub growth and rising value per sub.”

Indeed, with increased numbers of consumers housebound due to the pandemic, the stay-at-home market has proven a boon for Roku with platform and player revenue up 46% and 35%, respectively, since last year.

But Roku is hedging much of its future on AVOD, contending that the traditional linear TV business model will migrate to connected televisions it either manufactures and/or empowers.

According to Magna Global, U.S. TV ad spending is expected to decline 24% and domestic digital ad spending is projected to drop 5%. Roku claims its monetized video ad impressions grew about 50% in the most-recent fiscal quarter — with first-time ad buyers up 40% year-on-year. The retention rate among advertisers spending $1 million or more in the first half of 2019 was 92%.

“Our performance advertising business, a newer category catering to direct response advertisers, grew 346% year-over-year, aided in part by marketers re-evaluating their social media spending,” CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

In June, Roku launched “OneView Ad Platform,” a proprietary shopper data partnership with supermarket giant Kroger that targets and measures advertising using retail purchase data.

“When we look at the major tech players, there doesn’t seem to be dominant IPTV strategy,” Bazinet wrote. “Alphabet [parent of Google/YouTube) and Roku cover the entire waterfront: they sell IPTV hardware, push their TV OS and hope to monetize IP video with their app that sits inside the OS.

“Other players such as Amazon, Apple and Netflix are more focused on a narrower slice of IPTV opportunities.”

 

Disney Offering ‘Mulan’ Access via Roku, Apple, Google Play

The Walt Disney Co. is a longtime champion of preserving the traditional theatrical window, eschewing industry efforts to push premium VOD in the home for new release movies.

As a result, the company’s decision to offer the live-action remake Mulan directly to consumers on Sept. 4 for $29.99 is a one-time bet requiring maximum distribution.

To that end, Disney will sell “premium access” to Mulan to Disney+ subscribers via Google Play, Apple and Roku. The move is significant considering that when CEO Bob Chapek first announced direct-to-consumer access to Mulan on the the company’s fiscal call, it was through Disney+ exclusively. Now Disney will share Mulan revenue with Apple, Roku and Google.

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The move suggests Disney might be having difficulty convincing Disney+ subs to directly purchase the film on its app.

“Starting Sept. 4, with Premier Access, you can watch Mulan before it’s available to all Disney+ subscribers,” Disney said in its FAQ section. “Disney+ will offer Premier Access to Mulan for $29.99 on DisneyPlus.com and select platforms, including Apple, Google and Roku. Once you have Premier Access to Mulan, you can watch as many times as you want on any platform where Disney+ is available. Your access to Mulan will continue as long as you are an active Disney+ subscriber.”

The movie thus far is not available through Amazon Fire TV, Sony PlayStation and Microsoft Xbox, despite the platforms affording access to the Disney+ app.

Cinedigm’s Comedy Dynamics Streaming Service Available on Roku

Cinedigm’s OTT video partnership with Comedy Dynamics has gone where HBO Max hasn’t: Roku.

Comedy Dynamics Aug. 17 officially launched its AVOD app on Roku, showcasing a library of comedy content. The app is free to Roku users and features a substantial supply of stand-up comedy specials curated by the Comedy Dynamics team. The app is powered by Matchpoint Blueprint, a service provided by Cinedigm.

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“We have a saying here that ‘We Are Where You Are,'” Brian Volk-Weiss, CEO of Comedy Dynamics, said in a statement. “I believe this partnership with Roku is a huge step forward to fulfilling that commitment.”

Founded in 2008, Comedy Dynamics is one of the largest independent producer and distributor of stand-up comedy content in the U.S. and is home to the largest indie comedy audio catalog, including multiple Grammy Award nominated specials. 

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Programming includes stand-up specials from comedians such as Jim Gaffigan, Tom Segura, Iliza Shlesinger, Whitney Cummings, David Cross, Gary Gulman, Maria Bamford, Mike Birbiglia, Bill Hicks, Cameron Esposito, D.L. Hughley and Janeane Garofalo, among others. 

When WarnerMedia launched HBO Max, it failed to secure distribution on Roku and Amazon Fire TV due largely to money and data issues. NBCUniversal’s Peacock service is also not available on Roku — the largest standalone subscription media device market holder.

Roku Saw Record Q2 Digital Movie, TV VOD Transactions; CFO Steven Louden to Continue

With more and more households streaming video, over-the-top device/platform pioneer Roku is reaping the benefit, helping consumers adopt Internet-delivered content, including movies and TV shows.

San Jose, Calif.-based Roku Aug. 5 announced it was the No. 1 connected device based on hours streamed for Disney+ in the week following the movie release of Hamilton, according to Comscore. Digital movie and TV rentals/purchases hit an all-time high in the second quarter, ended June 30, as direct-to-home feature movies Scoob! and Trolls World Tour helped more than double year-over-year subscriptions through “Roku Pay,” the company’s integrated billing platform.

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Longtime CFO Steve Louden, who earlier announced he was leaving to relocate in Seattle, Wash., is staying in his position and will telecommute.

Steve Louden

“Steve has proved that he is more than capable of performing the CFO role while residing in Seattle,” Woods wrote. “Hence, we are delighted that Steve will be staying on as Roku’s CFO and we have ended the search for his successor.”

Meanwhile, active account growth accelerated 41% year-over-year, with accounts topping 43 million, driven by sales of both players and Roku TV models. Player unit sales increased 28% led by growth in the U.S. and in certain international markets. Notably, existing Roku users added almost three million new Roku streaming devices to their accounts during the quarter. Roku TV sales accounted for one in three smart TVs sold in the U.S.

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The Roku Channel more than doubled its reach in the U.S., with the ad-supported VOD service watched by households with an estimated 43 million residents.

“We believe the pandemic has accelerated the long-term trend toward all TV being streamed,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

Roku tripled its net loss to $42.2 million, from $10.4 million during the previous-year period — due in part to 36% increase in R&D costs; 75% uptick in sales and marketing; and 56% spike in general and administrative costs. Revenue increased 42% to $356.1 million, from $250.1 million a year ago.

The executives declined to give guidance on the current fourth quarter due to the increasing prevalence of COVID-19 infections around the world and the potential for disruptions and changes to historical consumer behavior and spending patterns during the back-to-school and holiday seasons.

“Q4 is the seasonally largest quarter for Roku and there is a wide range of potential outcomes given increased consumer interest in streaming on one hand, and the possibility of retailer, supply chain and advertising constraints at critical times on the other,” Wood and Louden wrote.

 

Roku: MLB Return Not Driving Pay-TV Viewership

The return of Major League Baseball during the coronavirus pandemic hasn’t resulted in a return to pay-tv, according to new data from Roku. The streaming media device manufacturer/distributor, citing internal research, found that 70% of households that watched baseball in 2019 did not tune in to watch the 2020’s delayed season opening weekend.

A loss of live sports due to COVID-19 is the primary reason 25% of survey respondents said they have dropped pay-TV. Just 20% of those subscribers said they would re-new pay-TV with the return of live sports. The findings counter claims by Disney-owned ESPN and Fox Sports about record opening weekend baseball ratings.

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“The return of MLB was a swing and a miss when it comes to viewership for traditional linear TV as less than one third of baseball’s 2019 household audience tuned in to watch any of the opening week games on linear television,” Gaurav Shirole, director of audience measurement at Roku, said in a statement.

Shirole believes that as live sports returns, fans have found new ways to consume it via video streaming services such as MLB.tv, the SVOD platform affording subscribers out-of-market games live or on-demand.

“Blacked out games are typically available to stream about 90 minutes after their conclusion,” he said.

Other MLB streaming sources include YouTube TV (a sponsor of last year’s World Series), Sling TV, Hulu with Live TV, AT&T TV Now and fuboTV, among others.

Games are also broadcast across a variety of channels, including ESPN, ESPN2, FOX, FS1, TBS, MLB Network and regional networks including NBC Sports and Fox Sports.