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ROKU GROWS ACTIVE ACCOUNTS TO 61.3M, STREAMING HOURS UP 14% IN Q1

By Bevin FletcherApr 29, 2022 09:13pm
Rokuquarterly earningsadvertising-based video on demand (AVOD)advanced
advertising
In Q1 The Roku Channel was a top 5 channel on its platform in the U.S. both by
reach and by hours of engagement. (Roku)

Roku continued to grow active accounts in the first quarter of 2022, though it
moderated to 1.1 million incremental additions for a total of 61.3 million.



As more customers are added, usage also increased, with streaming hours
increasing 14% year over year to 20.9 billion. That’s an increase of 1.4 billion
hours over the fourth quarter of 2021.

During Roku’s earnings call CFO Steven Loudan said the more tepid active account
growth was partly due to the government ending stimulus payments, which had
provided a boost in 2021 as consumers had more money on hand for discretionary
spending. He also cited continued supply chain disruptions that drove up the
price of U.S. TVs, resulting in lower industry-wide TV sales that remained below
2019 pre-Covid levels for a third straight quarter.




During Q1 Roku grew revenue 28% year over year to $734 million, as it saw a 39%
bump in platform revenue to $646.9 million, with player revenue declining 19% to
$86.8 million. The platform segment benefited from higher distribution and
strong growth in advertising revenue. However, profits saw a steep decline as
the company reported income losses of $23.5 million, reflecting a 131% drop
versus Q1 2021. Adjusted EBITDA was down 54% from the year prior to $57.6
million.

As more people tuned into streaming and TV during the pandemic, executives noted
a difficult year over year comparison to 2021.


RELATED

Roku adds 16 new live linear channels

Loudan said financial performance was solid in the face of a challenging
operating environment, but Roku expects to continue to have near-term challenges
related to further uncertainties around supply chain disruptions, inflation
pressures and geopolitical conflicts.



“We believe that the near-term headwinds are drove by the long-term
opportunities in the secular shift to TV streaming and TV OS consolidation. The
enormous value we deliver to consumers, content owners and advertisers will
drive our growth,” Loudan said, according to a SeekingAlpha transcript.

For the full year Roku is forecasting total net revenue growth of about 35% year
over year.

It’s Roku’s belief that “all audiences, all content and thus all advertising
will shift to TV streaming,” Loudan said.

Roku’s letter to shareholders called out Nielsen data showing that TV streaming
devices surpassed legacy pay TV set-top boxes and DVR in weekly reach in the
U.S. for the first time, with 65% of adults 18-40 years streaming TV versus 63%
watching pay TV in March.

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“We will continue to enhance our OS, our ad platform, and drive the Roku Channel
flywheel with great new content. And we will continue to provide content
publishers with the audience and tools to grow successful streaming businesses.”

More AVOD benefits Roku

As more ad-supported options for streaming come to market, including potentially
Netflix which has signaled it could introduce a lower-cost option that has ads,
Roku sees opportunity.

Executives wouldn’t comment on what Netflix might do specifically other than to
say the streaming giant “is a great partner” with Anthony Wood noting Roku has
been working with the company since its streaming player launched in 2008.


RELATED

Netflix eyes lower cost ad-supported tier

Bringing in ads lowers the costs of services for consumers, attracting a wider
audience and increasing interest in streaming.  

As a streaming platform, Roku has a different business model than streaming
services, making money by connecting consumers with content and advertisers.

“And so anything that causes more streaming to flow through the Roku platform is
good for us and good for our business,” Wood commented. “More generally, I think
we believe that more AVOD offerings will accelerate the movement of traditional
TV budgets into streaming.”

Traditional TV advertising in the U.S. is a $60 billion opportunity, but most TV
ad spending hasn’t moved to streaming yet with only 18% from traditional TV
shifting to streaming so far, he said.

“Yet almost half of all TV time is streaming. And so it’s going to be 100% of ad
budgets moving to streaming,” Wood continued.

In Q1 Roku retained 96% of advertisers that spent $1 million or more, and
average spend among returning advertisers increased by more than 50% year over
year.


RELATED

Roku adds media mix modeling to its ad measurement portfolio

In April, Roku took several steps to beef up advertising tools and capabilities.
It integrated media mix modeling capabilities to its Measurement Partner Program
and launched a data cleanroom for advertisers to have a secure environment for
ad planning and measurement. It also rolled out a beta version of a dynamic
linear ad product, and earlier this year built in Nielsen Digital Ad Ratings to
its OneView platform.

As for popularity of ad-supported options, he said The Roku Channel, which is a
free, completely ad-supported channel, is “doing incredibly well for us.”

In Q1 The Roku Channel was a top 5 channel on its platform in the U.S. both by
reach and by hours of engagement.

Roku recently reached a licensing agreement with A+E networks to expand content,
and closed its first theatrical film output deal with Lionsgate for upcoming
releases through 2024.

AdvertisingVideostreaming deviceadvertising technologystreaming videoNetflix

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