Roku is a firm that makes streaming devices that allow you to stream material from the internet, such as games or movies.
Roku generates revenue from hardware sales, licensing its Roku operating system, advertising on The Roku Channel, and its premium membership marketplace.
Roku, which was founded in 2002, has grown to become one of the leading makers and distributors of streaming devices in the world. Roku went public in 2017 as a result of its continuous growth. The corporation now has a revenue of approximately $1.7 billion every year.
Roku is a firm that makes several media-streaming devices that use its software. It competes in the over-the-top (OTT) sector, which offers internet-based television, cinema, and other digital content.
Roku devices or Roku’s built-in software for smart TVs can be used to stream media such as movies, television shows, and music.
Roku provides a variety of products, including:
• Roku Box: A Roku Box (such as the Roku Premiere or Roku Streambar) is a standalone device that connects to the TV through HDMI.
• Roku Streaming Stick: It is a USB stick that may be placed into your TV (along with a remote).
• Roku TV: Because the Roku operating system is already incorporated into the TV, no separate Roku hardware is required. Roku’s software is compatible with smart TVs from manufactures like Sharp, Hisense, and Hitachi.
Roku’s Business History
Based in San Jose, California, Roku was created in October 2002 by Anthony Wood, who remains the company’s CEO.
While Roku has been his most successful business venture to date, it is far from his first. Roku is a Japanese word meaning “six,” referring to the fact that it is Wood’s sixth company.
Wood is a tinker, in the best sense of the word. He began playing with various hardware components at a young age (he was born in Manchester, England, although his family eventually moved to Georgia and Texas).
After spending a year as an exchange student in the Netherlands, where he took computer classes, among other things, Wood returned to Texas and taught himself to program.
What is Roku’s revenue model?
Roku makes money via selling devices, licensing its Roku OS, advertising on The Roku Channel, and recommending other streaming services.
Let’s see these points.
Sales of Hardware
Roku makes money in many of ways. One of the most visible is through selling streaming devices.
These devices are available for purchase on Roku’s website and through third-party retailers like Amazon and Walmart.
Roku sells a streaming stick, a Roku Streambar (an audio system that connects to the TV), and HDMI-enabled streaming devices, as examples (such as Roku Express or Roku Premiere).
As previously said, Roku sells these gadgets for almost nothing. It is done to allow the ad-supported Roku platform, which has substantially higher profit margins (over 60 percent).
Device sales now account for roughly 30% of Roku’s total revenue. When it comes to profits, the contribution is less than 1%.
Roku stated in 2013 that it would license its operating system to other innovative TV manufacturers so they could incorporate that into their products.
Roku-enabled smart TVs will have a 38 percent market share in the United States by 2020, making them the de-facto industry leader. Similarly, the corporation has a 31 percent market share in Canada.
Hitachi, JVC, Philips, ATVIO, Westinghouse, and more brands have signed licensing agreements with Roku today. The Roku OS now runs on over 100 models.
When a consumer purchases and activates one of these smart TVs, Roku makes money. The company’s amount of money for each device is determined by the two parties’ agreement (not publicly disclosed).
In 2017, Roku established The Roku Channel, an independent channel that broadcasts licensed content from various media businesses.
Media corporations such as Warner Brothers, Paramount, Lionsgate, and others are among the licensing partners. The Roku Channel now offers over 100 channels with over 100,000 titles to stream.
Roku generates money by displaying advertisements during commercial breaks and while the video is paused. A portion of the advertising revenue is subsequently distributed to the license partners.
The Roku Channel has been one of the company’s key revenue generators in recent years.
Furthermore, Roku continues to invest extensively in providing the most acceptable adverts to its users (thus maximizing returns for its advertising partners).
To that end, in May 2020, the firm released OneView, a tool that allows marketers to track their success. OneView is built on the dataxu platform, which Roku purchased in 2019 for $150 million.
Advertisers can, for example, target consumers based on ZIP code, personal interests, and other data factors using OneView (while simultaneously allowing them to pull the ads any time they want).
Furthermore, suppose customers have already seen the identical commercial on traditional television. In that case, Roku will ensure that it is not broadcast on its platform (it needs user consent to track their linear TV activities, though).
More than 60 million households now have access to The Roku Channel in some way (through Roku devices, smart TVs, or the company’s mobile apps).
Roku announced a subscription video on demand (SVOD) platform in 2019 that lets you buy memberships to other streaming providers like Epix and Showtime. Users can choose their subscription and pay for it through Roku’s platform.
Roku receives a portion of the subscription money generated by these firms in exchange for marketing these subscriptions and offering a secure payment method. However, the actual percentage share is contingent on Roku and the streaming service agreeing.
Roku revenue, valuation, and funding
Roku has raised a total of $208.6 million in 11 rounds of equity fundraising, according to Crunchbase. When the firm went public in September 2017, it raised an additional $219.4 million.
Menlo Ventures, Viacom, Sky UK, Fidelity, Hearst Ventures, All Blue Capital, and others are notable investors.
Roku’s business was valued at $1.3 billion when it went public. Its company now has a market valuation of roughly $45 billion, reflecting a 45-fold rise since its first public offering.
Roku announced $1.7 billion in sales for the fiscal year 2020, a 58 percent increase over the previous year. During the same period, the company made an $808 million profit.