Roku Tops 30 Million Subs, Stock Up Nearly 9%

Roku hit a fiscal home run Aug. 7, beating its estimates for second-quarter (ended June 30) revenue, gross profit and pre-tax earnings.

The streaming media device manufacturer and over-the-top operating system, said it ended the quarter with more than 30 million active user accounts — up 39% from 22 million accounts in the previous-year period.

Total revenue increased 59% to $250.1 million, while platform (ad-supported) revenue skyrocketed 89% to $167.7 million.

Streaming device revenue increased 24% to %82.4 million from $66.5 million last year.

“The industry-wide shift to streaming is accelerating,” founder/CEO Anthony Wood and CFO Steve Louden wrote in the shareholder letter.

At the same time, Roku is attempting migrate revenue away from hardware to advertising and evergreen software sales. As a result, hardware operating income dropped 69% to $4.5 million from $14.7 million, due in part to lower pricing for Roku players and streaming sticks.

“As anticipated, gross margin declined sequentially due to continued mix shift to video advertising, the introduction of premium subscriptions and our strategy of driving down player [average sales pricing] … grows our active accounts faster,” Wood and Louden wrote.

The net effect resulted in loss from operations increasing to $10.4 million from $100,000 last year.

Regardless, Roku’s status among TV manufacturers seeking connectivity with the Internet remains strong.

According to Kantar Milward Brown, Roku is the No. 1 TV streaming platform in the U.S. by hours streamed. Last month, Strategy Analytics reported that the Roku operating system powers about 41 million OTT devices and smart TVs in the U.S. This is 36% greater than the next closest competitor and expected to grow.

Separately, Parks Associates consumer survey data revealed Roku had 39% of the U.S. streaming media player installed base as of Q1 2019.

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Roku disclosed it has partnered with Walmart to roll out a series of OEM branded streaming devices under the retailer’s name.

“This is in addition to Roku TVs and Roku players already sold through Walmart,” they wrote. “Our purpose-built OS allows us to offer superior streaming experiences to consumers at attractive price points.”

Wood and Louden contend 3.5 million U.S. TV households cut the cord from March 2018 through February of 2019, moving from traditional pay-TV to streaming.

“‘Cord-cutters’ and ‘cord-nevers’ access video on their TV exclusively through streaming and Roku has the largest share in the U.S.,” read the letter. “This is a valuable strategic position for our advertising business as brands cannot reach these consumers via traditional linear TV.”


Parks: Streaming Media Player Ownership Flattening With Roku and Amazon Leading Space

More than a third (39%) of U.S. broadband households own a streaming media player, but that’s a mere 1% increase from 2018, according to new research from Parks Associates.

Ownership has flattened, the firm noted, although purchase intentions are higher for 2019 compared to previous years.

The report, 360 Deep Dive: Adoption and Use of Connected Video Devices, found connected video device manufacturers may need to shift focus from hardware sales to service and advertising revenue, as ownership reaches saturation, according to Parks.

“Streaming media has reshaped how U.S. consumers interact with entertainment content and services, so as the market matures, sales increasingly come at another vendor’s expense,” said Parks senior analyst Kristen Hanich in a statement. “Video-quality features are the most important factors when consumers buy a connected video device, although Roku and Amazon have certainly benefited among streaming media players by having broad product portfolios that include lower price points.”

Among streaming media players, Roku and Amazon’s Fire TV are the clear market leaders with almost 70% of the installed base of streaming media players in the United States, according to the firm. Consumer-reported data reveals that between Q1 2017 and Q1 2019, Roku’s share of the U.S. streaming media player installed base grew from 37% to 39%, while Amazon’s share of the installed base increased from 24% to 30%.

The report looks at the state of the connected video device space, including smart TV platforms, streaming media devices, smart set-top boxes and gaming consoles, examining the changing roles of these devices and how consumers are engaging with new functionality, such as voice control and live TV integration.

“As the addressable market shrinks, rivalry increases,” said Parks senior analyst Craig Leslie in a statement. “The combined installed base for Roku and Amazon is three times larger than the nearest competitor. The adoption of Roku and Fire TV streaming media players continues to grow at the expense of Chromecast and Apple TV.”

One Billion Internet-Connected TV Devices in Use Globally

It’s a streaming video world. There more than one billion connected TV devices now in use worldwide, according to new data from Strategy Analytics.

Connected TV devices – including Smart TVs, Blu-ray Disc players, video game consoles, streaming media devices – enable users to stream over-the-top video content to the TV.

Smart TVs have been consistently gaining market share and now represent nearly 60% of the total Internet-connected media device installed base.

“The popularity of connected TV, in particular Smart TVs and dedicated media streaming devices such as Roku, Amazon Fire TV and Chromecast, has grown dramatically over the last few years and has led to a fundamental shift in how consumers view and engage with content on the TV set,” David Watkins, director at Strategy Analytics, said in a statement.

Spearheaded by Roku, Strategy Analytics expects more than 55 million streaming media devices to ship globally this year – about a third of 150 million Smart TV market.

“Sony has long been the global leader in connected TV devices in terms of devices installed in homes thanks not only to its strength in TVs and Blu-ray players, but also as a result of its leading position in the global game console market,” added David Mercer, VP at Strategy Analytics.

The report said Samsung now equals Sony at the top of the rankings in terms of overall installed connected TV device units, and the South Korean company is poised to take the lead in the second half of 2018.

“As Smart TVs take an ever-growing share of the overall market, Samsung will replace Sony at the top of the device footprint rankings later this year thanks to its dominant position in the world’s Smart TV market,” said Mercer.

Parks: Streaming Media Players Used More Frequently Than Smart TV

Streaming media players such as Roku, Amazon Fire TV, Apple TV and Google Chromecast are the most frequently used Internet-connected entertainment devices, with 41% of owners using their devices daily or almost daily, according to new data from Parks Associates.

The research firm said 34% of smart TV or smart PVR/DVR (i.e. TiVo) owners use these devices daily – slightly more than video game consoles. About 15% use Internet-connected Blu-ray Disc players.

The firm’s study shows that among consumers who say their streaming media player is their preferred device for accessing online content, they report spending 10.4 hours per week watching online video content on this device – compared to 9.8 hours among smart TV owners.

“The smart TV is the most commonly used Internet-connected entertainment device, and it is the device most commonly associated with pay-TV services, but when looking specifically at device owners, consumers are spending more time online with their streaming media players,” research analyst Kristen Hanich said in a statement.

While almost half of U.S. broadband households own a gaming console, only 37% of households actually connect that device to the Internet. About 44% of U.S. broadband households connect a smart TV to the internet, while 53% of households own this product. Over 34% of streaming media player owners now own an Amazon Fire TV, up from 28% in Q1 2017.

“Sixty percent of households that have at least one Internet-connected entertainment device own multiple devices – their viewing habits often vary by device as well as by room, with some devices and rooms over-indexing in terms of content type watched,” said Hanich.

Parks will discuss the online video and OTT markets at the upcoming conference Future of Video: OTT, Pay TV, and Digital Media Dec. 10-12 at the Marina del Rey Marriott in Los Angeles.