A below-the-radar winner in the streaming wars: Roku

Roku is a minnow compared to giants in the streaming space (AT&T, Amazon, Apple, Disney Netflix). How did it become a content gatekeeper?

The streaming battlefield is a land of giants: Apple ($2.3T market cap) Amazon ($1.8T), Netflix ($245B), Disney ($241B), AT&T ($210B), and Comcast ($206B) are all in the ring.

Valued at only $22B, Roku is a relative minnow. But the company has become a “major gatekeeper” in the premium streaming space.

In recent negotiations with these content kings, Roku essentially dropped every company’s dream line: You need us more than we need you.

How did this happen?

Cable companies have traditionally been the gatekeepers of premium content. But Roku crashed the party in 2008 with its ubiquitous sticks and app that enabled users to stream online media on their TVs.

Roku now boasts 10k+ channels and 43m total active accounts — more than any US pay-TV provider.

Bolstered by pandemic binge-watching, the company hit 14.6B hours of streaming (+65% YoY) during Q2 2020.

Roku sells its hardware at a loss 

In 2019, Roku took a loss of $60m on revenue of $1.1B — largely due to its hardware costs. But the company’s services business (ads and subscriptions) now account for ~70% of its revenue.

One analyst tells Variety that Roku’s pivot from hardware to services is something that you “almost never see in tech.” That’s probably as rare (but not nearly as satisfying) as telling streaming giants that you don’t “need” them.

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