Ask anyone to name the world’s biggest streaming services, and they’ll likely trot out the usual suspects: Amazon, Netflix or Disney. What’s less likely to feature is The Roku Channel, the homegrown, ad-supported streaming service for Roku users. But Roku isn’t content with just being an afterthought, and has made a series of moves to bolster its free streaming ecosystem. We sat down with Scott Rosenberg, Roku’s SVP and General Manager of its platform business, to understand it all.
“The hardware side of our business,” he said, is run at “roughly break-even, so that we can build a profitable business on the media side.” Roku makes the majority of its money from licensing, data and advertising, rather than the streaming pucks, dongles and TVs it is known for. And business is booming: The company pulled in $1,78 billion in revenue and enabled 58.7 billion hours of streaming across 2020. A key plank of this strategy is its own channel, which the company says “drives a virtuous cycle of viewers, advertisers and content.”
And, these days, more and more people are turning to The Roku Channel for their entertainment, with an estimated 63 million people using the app. Rosenberg said that it’s this spike in viewership and the commensurate rise in ad spending by big brands, which has empowered his team. He added that the boost in viewer numbers enables them to “be more creative, and think bigger about how we get content.” He added that there are almost 200 studios and distributors who are looking to get their material on Roku’s own platform — everything from MGM and Lionsgate through to small indie houses. You don’t even need a Roku device to access it, since the company also offers a standalone iOS and Android app to watch the content on.
It’s just three months into 2020, and already Roku has spent substantial sums to bolster its content offerings. In January, it bought Quibi’s content library from the wreckage of Meg Whitman and Jeffrey Katzenberg’s micro-TV streaming failure. The company now owns around 75 short-form TV series including Chrissy’s Court, Reno 911! and 50 States of Fright. (The latter is an anthology series that adapted American folklore tales which includes social media-favorite The Golden Arm). In March, Roku also picked up the owner of the This Old House franchise, including 1,500 episodes of the home-renovation series, and the studio where production is based.
“They’re more aggressive moves than you’ve seen from us in the past,” said Rosenberg, “enabled by the fact that The Roku Channel has gotten bigger.” Certainly, This Old House is a mainstay and has been running almost continuously since 1979. Quibi’s shows, meanwhile, are likely to reach a wide, global audience for the first time when those episodes are released, although the distribution pattern is still being worked out. Given the social-media gawking prompted by some of those early Quibi hits, however, it’s likely people will want to tune in to see what all of the fuss was about. (It helps, too, that Quibi leaned in hard on star power for its first wave of shows, which Roku can harness for the secret knock-down price it paid for the catalog.) It also debuted its first original series, Cypher, which has had a lukewarm reception so far.
The channel’s reputation is, perhaps, one where you’ll have to make an effort to find some diamonds buried in a lot of rough. In March, for instance, you could get a number of movies like The Maze Runner, Enemy at the Gates and Vanilla Sky, the sort that pop up on late-night TV to keep insomniacs company. Similarly, the TV series on offer are a mix of one-season wonders, older reality shows that pad out many other channels’ schedules and archive content, like Bonanza.
Rosenberg says that, in many ways, this is part of Roku’s charm, because it can’t burn billions on the altar of original content like its well-heeled partners. “The criticality of having exclusive content for an SVOD [Subscription Video On Demand] service is very high,” he said, “because you’re trying to justify to that consumer, month after month, why they should stay subscribed.” Roku, meanwhile, as a “pure, free, ad-supported service,” doesn’t need to worry about exclusivity, “it’s okay if the content is available in other places.” That puts it side-by-side with a service like Crackle, which has a similar selection of films few others are clamoring for.
These are, however, turbulent times for most ad-supported businesses, especially in the wake of 2020’s pandemic. A lot of the billions in ad money that was spent through 2020 was pulled from linear, broadcast TV networks and placed with the big social media giants. Rosenberg says, however, that Roku was able to split both sides of the equation, as a TV business that can also do fairly niche advertising. The other thing that is driving marketers’ attention towards streaming is it’s ultimately a far superior TV advertising medium,” he said.
In order to bolster the advertising side, Roku has armed-up its in-house advertising firm in anticipation of a surge in spending. It bought Neilsen’s Advanced Video Advertising Unit, which is capable of inserting targeted adverts in commercial breaks, leading to real-time targeting of users with specific needs. Soon after, Variety reported that it was building its own ad content studio, hiring several Funny or Die execs in the process. “We believe many more tens-of-billions of dollars will be reallocated [by advertisers] over the next couple of years towards streaming,” said Rosenberg, “we think, as a platform, with our scale and our data, we can be a primary player in creating these consumer ad experiences.”
Rosenberg believes, ultimately, that Roku is positioning itself as the best alternative to the big streaming networks, rather than as their rival. “Consumers will have a finite appetite for the number of services they’re going to subscribe to,” he said, “but it’s certainly not going to sate the consumer’s TV appetite.” “So where’s the consumer going to get all of the rest of the content that they’re going to view?” he added. It’s in that space, filling in the gaps people won’t be getting from the rest of their streaming diet, that Roku hopes is gold. And certainly, it’s going to be an interesting year watching if consumers respond positively.
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