What’s driving Roku’s revenue and stock price higher? It isn’t just advertising revenue, although that has been touted by the company and industry followers.
Tim Nollen, senior media analyst of Macquarie, believes another factor is at work: the low level of media/TV company conflicts.
“The one advantage Roku has always had is its independence,” he told CNBC on Wednesday. “There is no conflict in terms of hosting any apps from any providers, [and] there are no conflicts in getting on devices.”
This is in contrast to wide-ranging media/TV/film/communication entities such as Comcast. It is not only a major TV-film content producer, but also a major TV platform distributor, via cable TV systems and broadband.
New streaming businesses have recently seen conflicts between major media companies and newer digital video businesses -- for example, pulling back on big license TV properties from Netflix: “The Office” will return to NBCUniversal, while “Friends” heads back to WarnerMedia.
While detractors will scoff at modern media consolidation being good for the consumer, Roku is proof that a small-to-midsize TV platform can carve out a place.
The question is: Will it last? What happens if and when Roku sells out to a larger company? Then perhaps, we return to all those anti-competitive questions.
Roku sells its video/app distribution system to consumers via streaming devices -- boxes, sticks, whatever. But it increasingly also makes deals with smart TV manufacturers in which Roku is integrated into smart TV app interfaces.
Roku generally takes a piece of advertising time on the apps/platforms it carries -- reportedly around 15% of the ad time that runs in content per hour. This amounts to a lot; it has more than 1,800 channels in its channel store.
Some analysts believe Roku’s go-it-alone approach works in this environment partly because this is in line with major TV content providers. They also typically want to go it alone through their current and future direct-to-consumer (D2C) businesses.
In contrast to this, you may now wonder why Sling TV or DirecTV Now have seen increasing sluggish subscriber growth. Consumers may just shrug their shoulders, perceiving those services as a slight improvement/alteration from the cable, satellite, and telco packages of live, linear TV networks.
Packages from virtual pay TV providers might only offer 50 to 70 channels, all for a much lower price than consumers paid for cable, satellite and telco -- the latter offering, at best, 200 to 400 channels.
Now, compare that to a Roku and a potential 1,800+ number.
Consumers may say they want lower prices with, at best, the dozen or so channels they may regularly watch. But they also want lots of choice at the same time.
Media brand independence may be a good thing.