Have you ever wondered how does Roku make money? This successful company has been offering its contents in online since its appearance in 2002. Throughout its operating life, it has been diversifying both in products and services as well as in its income streams.
Generally speaking, this enterprise makes its profits from licensing, advertising, and sales of hardware for Roku streaming devices. It also receives earnings from its collaborations with various Over-the-top media platforms such as Hotstar, Netflix, Hulu, among others. Another important source of income is represented by its Premium subscription program.
According to specialized reports, this streaming giant is maybe the most successful in the market. According to recent statistics, their annual earnings are located at around $1,700 million. Expect to see high returns in future years as Roku has been publicly traded since 2017. This makes it stand out from nearby competitors like Google Chromecast and Amazon TV. Its market capitalization is already around $37 billion.
Learn more about Roku
Roku enters the market in 2002, October, in San José, California USA, at the hands of its founder Anthony Woods. The meaning of his name has an interesting history, this word is translated in Japanese as “six”, which means that it was the sixth company that Woods started.
Before Roku, there was SONICblue, the fifth company. This one, by going bankrupt, paved the way for the arrival of Roku Inc. since its founder refused to give up. Since its inception, this sixth company has been oriented towards success. Just six years after its foundation, in 2008, it was already collaborating with Netflix on the launch of by Roku-Netflix Media Player.
Starting that year, Roku Inc. started to grew rapidly. It expanded its services, added some more channels, introduced new devices and expanded to other several countries. Faced with competition from companies such as Apple and Amazon, it partnered with various electronic hardware companies such as Hisense, Coby and TCL. As a result of these associations, its application was exclusive to smart televisions manufactured by these companies.
Already at this level the answer to the question about how does Roku make money? It begins to become apparent. Keep reading and find out more about the Roku business model and all the benefits it generates annually.
Roku business model How does Roku make money?
How does Roku make money? The answer is, from different products and services that it provides through its own and associated platforms. Let’s see some of them below:
Sale of advertising
As we have already told you before, Roku is an ad-supported content service provider. It is obvious then that advertising is an obvious source of income generation for this company. In fact, it is one of the main elements of the Roku business model.
These advertisements are generated every hour for about eight minutes and are also presented when users pause content on the independent channel The Roku Channel. According to authorized sources, advertising represented 74% of its total income in 2020. We would then be talking here about $1,178.8 million.
Hardware sales
Sales for this item are also an important part of how Roku makes money. This activity is carried out through channels of retail distribution such as Walmart and Amazon. Hardware and accessories include products like Roku’s HDMI-enabled streaming devices, streaming sticks, and the Roku Streambar. The company maintains a development of new devices so as not to be left out of the market competition.
Regarding the income generated by this activity, you should know that the sale of these products represents around 6-7% of the total income. Sales jumped from $287.4 million to $388.1 million between the years 2017 and 2020.
The sale of hardware is the first source of income. However, it is the least important for the company due to its comparatively low margins. The objective that the company then pursues with its marketing is to place itself in the greatest number of homes possible. In this way they increase the other lines of sales.
Licensing fees
Since 2013, Roku Inc. collaborates with various electronics brands such as Philips, Hitachi and JVC to license its operating system. This license allows to embed this S.O. on their Smart TVs.
Currently this operating system is installed on more than 100 different brands of televisions. As a result of this licensing, Roku earns a commission every time someone buys a TV model covered by the license.
How does Roku make money? subscriptions
Many media companies and video publishers buy subscriptions on Roku to monetize their channels. This monetization comes in two forms: ad-based (AVOD) and subscription-based (SVOD).
In the first modality, AVOD, video channels insert their advertisements before and after their content, as in cable television. The advertising of these channels includes advertisements, sponsored content, infomercials, among others. Roku receives revenue for enabling these streams.
As for the second modality, SVOD, users pay a monthly or annual fee to be able to enjoy the contents of the Roku platform. This streaming subscription allows Netflix, Hulu, Hotstar and other content to be enjoyed by ordinary people like you.
How much is Roku earning per user?
According to the most recent statistics, Roku earns $32.14 per user. This gain corresponds to the first half of 2021 and represents an increase of 32% year-on-year.
Thanks to its various forms of services, ad-supported and subscription-based, Roku’s revenue has been skyrocketing. Both in absolute and relative terms, revenues have continued to grow throughout the company’s economic life. What’s more, Roku’s average revenue per user is about 40% higher than Netflix’s most expensive streaming plan.
Currently, the platform has about 32.3 million active subscribers. These guarantee annual revenues of $633 million in 12-month subscriptions to the platform.
Frequent questions
1. What does Roku make?
Roku is a pioneer brand in streaming playback for TV. Its mission is to be a platform that connects the entire world television ecosystem. To achieve this, it manufactures devices that are easy to configure and use. This hardware allows access to more than 100,000 movies and TV shows.
2. How does the Roku system work?
Roku is very easy to use. You just have to connect and turn on your TV. Connect to the internet during setup, create a Roku account, and activate your device. That’s how simple the process is to start using your Roku TV.
3. What is the Roku advantage? Its biggest advantage is that it provides access to a vast library of programs from numerous streaming services. Among them we can mention: Amazon Prime Video, Netflix, MP3Tunes, Hulu Plus, NBA Gametime, Spotify, NHL Gamecenter Live, CNN, NBC and many more.