• by Wayne Friedman , August 2, 2022

Roku could see lower premium ad prices due to rising competition from alternative digital media players, Pivotal Research Group securities analyst Jeffrey Wlodarczak writes in a new report sent to investors.

While the competition likely includes the likes of Amazon and TikTok, traditional cable TV and broadband providers are also a factor.

Industry estimates are that premium CTV ad inventory can be priced around the CPM (cost-per-thousand viewers) range of broadcast TV networks. Media Dynamics estimates broadcast TV CPMs for ad deals in the recently completed 2022-2023 upfront buying season averaged $47.14.

Competition for Roku, says Wlodarczak, could come from a new joint venture formed by Comcast Corp. and Charter Corp., which is based on Comcast’s nascent Flex streaming service. 

“In our view, it is a no-brainer as it levers the fact they control the dominant way consumers will access the internet for the foreseeable future,” he writes in a recent note.

Additionally, he says, Roku could see some financial declines due to a “massive fee bonanza from media & entertainment companies [launching] of direct streaming platforms.” 

Roku revenue splits -- from monthly subscription streaming fees with services that agreed to be carried on its platform -- appear to be “slowing materially," he writes.

Wlodarczak adds that bigger media companies -- such as Apple, Amazon, Google, and the Comcast/Charter venture -- can drive their streaming service costs down to near zero, especially if they are bundled with other media services.

Big traditional TV and movie studios may also be a factor contributing to "less favorable Roku agreements.”

This would be similar to what traditional content providers have done in recent years with cable TV operators.

Recently, Roku warned of a “significant slowdown in TV advertising” spending.

The news pummeled the company’s stock price, which fell  23% on the news, though it has recovered somewhat.

Roku also reported its second quarter “platform” revenue -- where much of its advertising revenues resides, as well as revenue from streaming apps and services -- was up 26% to $673.2 million versus a year ago.