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

As co-creator with Netflix of the subscription streaming video market, Roku has a 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 in generating 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.”

Roku Says Pandemic ‘May Accelerate’ Platform Growth

Nothing like a global pandemic to invigorate business — and costs.

Streaming media device pioneer Roku May 7 said most business-wide metrics surged during-and-after the first quarter, ended March 31. Active accounts grew about 38% to 39.8 million compared to the previous-year period at 29.8 million accounts — driven by 70% year-over-year increase in new accounts.

Streaming hours rose by about 80% year-over-year, driven by an increase in streaming hours per account of approximately 30%. The company said pandemic-associated stay-at-home orders and increased unemployment appear to have accelerated the shift from linear TV viewing to streaming during the past few weeks.

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Roku cited Nielsen data indicating primetime linear viewing among adults 18-34 from March 16 to April 19 decreased 18% year-over-year, with about 50% of TV content consumption streamed.

In a shareholder letter, founder/CEO Anthony Wood and CFO Steve Louden said player sales increased 25% year-over-year. Roku TV models now account for more than one in three smart TVs sold in the U.S. and more 25% of smart TVs sold in Canada. Streaming hours increased by 1.6 billion hours to a record 13.2 billion.

“[We] have benefited from a surge in OTT usage,” Wood and Louden wrote. “Current events have increased overall demand for both players and Roku TV models around the world.”

Yet while net revenue grew 55% to $321 million, and platform revenue increased 73% to $233 million, costs ballooned 76% to $196 million, driven in parts by sales and marketing. Net loss skyrocketed more than 500% to $55 million from $10 million.

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Wood and Louden said Roku is working with retail partners and TV brands to plan for the rest of the year — given the possibility of restrictions or changes in consumer shopping patterns during traditionally strong sales periods such as Back-to-School, Black Friday and Christmas.

“Over the longer term, not only do we believe that the trends that we expect to define the streaming decade will remain intact, but changes brought on by the COVID-19 pandemic may even accelerate Roku’s path to greater platform scale,” they wrote.

Roku Ups Loss, Stock Tumbles

Roku, which co-created the subscription streaming video market with Netflix, Nov. 6 reported a third-quarter (ended Sept. 30) net loss of $25.1 million, widened 164% from a net loss of $9.5 million during the previous-year period.

The company attributed the red ink to increased spending on marketing aimed at attracting user/subscribers.

Revenue increased more than 50% to $261 million from $173.4 million last year. Notable drivers included platform revenue, which increased 79% to $179.3 million compared to $100.1 million last year.

Platform revenue includes The Roku Channel featuring ad-supported programming.

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Roku said active accounts increased by more than 1.7 million to 32.3 million, while streaming hours increased 0.9 billion hours to 10.3 billion. Average revenue per user (ARPU) reached $22.58, up 30% year-over-year. Roku’s monetized video ad impressions more than doubled from the previous-year period. Player revenue increased 11% to $81.6 million from $73.3 million last year.

“We continue to execute well against our long-term strategic plan as the TV market shifts to streaming,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

The executives said Roku’s “business momentum” makes the platform an essential partner for content publishers and advertisers.

“This is evident in the launch of major new streaming services on our platform and by the growth in the number of advertisers who work with Roku,” they wrote.

“We expect platform revenue to represent roughly two-thirds of total revenue including approximately $13 million in revenue from Dataxu,” Wood and Louden wrote.

The company also revised its fiscal 2019 outlook downward, reflecting continued investment in the business as well as an approximate $5 million hit to Q4 pre-tax earnings related to Dataxu-acquisition-related expenses.

Last month,Roku acquired Boston-based Dataxu, an online video ad platform for $150 million in cash and stock.

Wall Street wasn’t impressed, sending Roku shares down more than 14% in after-market trading.

Roku Ups Q3 Loss Nearly 50%

Streaming media device pioneer Roku Nov. 7 reported third-quarter (ended Sept. 30) net loss of $11.7 million, up 49% from a loss of $7.9 million during the previous-year period. Revenue increased 39% to $173.4 million from $124.8 million.

Roku, which created the SVOD market with Netflix in 2008, generated $73.3 million in device revenue, up 9% from $67.2 million last year. Platform revenue, which includes The Roku Channel and third-party advertising, ballooned nearly 74% to $100 million from $57.5 million.

The company ended the quarter with 23.8 million active user accounts, up 43% year-over-year, with more than half of new accounts coming from licensed sources, primarily Roku TVs. Engagement increased with users streaming 6.2 billion hours, up 63% year-over-year.

“We are just starting to witness the massive transition of TV viewing and TV advertising to streaming,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

The executives contend the third quarter could be the highest fiscal period yet for pay-TV subscriber losses. A boon for OTT video and platforms such as Roku, according to Wood and Louden.

“The way TV content and advertising are delivered is evolving rapidly and we believe our purpose-built scalable solution is well positioned to be a catalyst for the transition that is underway,” they wrote.