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Rocky Times at Roku in Q2 2022: Is Digital Streaming in Trouble?

It looks like Netflix isn’t the only streaming giant getting bad Q2 News in 2022. Things are rocky at Roku.

Roku logo

Roku has a huge presence in the streaming landscape, their platform is not only used in their plug-in devices (streaming sticks, boxes) but in several brands of TVs and even in soundbars made by both Roku and Walmart (ONN). In addition, Roku provides content through its self-named Roku Channel

Tip: The Roku Channel is available on compatible Samsung Smart TVs, Amazon Fire TV devices, and most web browsers in addition to Roku devices and the Roku Mobile App

It’s All About The Money

Although Roku dominates the streaming device and OS market, that major presence hasn’t made it immune to the current trend of lower-than-expected Q2 2022 financial results.

Roku Home Screen

What is interesting is that even though Q2 results were lower than expected, the trend was still slightly positive:

  • Total net revenue grew 18% year over last year to $764 million
  • Platform revenue increased 26% over last year to $673 million
  • Gross profit was up 5% over last year to $355 million
  • 1.8 million incremental active accounts were added to reach 63.1 million
  • There were  20.7 billion hours, a decrease of 0.2 billion hours from the last quarter
  • Average Revenue Per User (ARPU) grew to $44.10 (trailing 12-month basis), up 21% from last year.
  • $1 billion in Upfront ad commitments were obtained.

As a result of lower-than-expect numbers, Q2 revenue expectations were off. Revenue was expected to be $805 million dollars but came in at $764 million dollars. The initial reaction by investors was a single-day stock price dip of almost 25%! Bank of America has placed Roku in the “underperform” category.

Tip: In the financial world, a slower growth trend can be as devastating as a loss as it may indicate problems with the long-term health of a company or the overall market. 

Viewership vs. Ad Spending on TV Streaming

Survival Strategy

However, unlike Netflix, Roku seems to have prepared better knowing that its growth was going to slow. The major factor contributing to their Q2 results appears to be lower Ad spending by its business customers in relation to viewer growth ($1 billion dollars in upfront commitments isn’t enough). The slight dip in viewer hours doesn’t help either as you need more viewers to attract more ad dollars. 

So far Roku hasn’t mandated massive layoffs or a hiring freeze, seeking instead to slow down new hiring and spending on its content side, as well as looking at the pace that new content is made or acquired and released. 

Positive Signs

Despite the current downturn, Roku expects to increase its position based on the continued trend of ad dollars migrating from traditional TV to streaming as the number of active Roku accounts continues to increase.

In addition, Roku has signed a streaming deal with Lionsgate and is in the process of ironing out a streaming deal with STARZ that will add more content to the Roku Channel and, hopefully, attract more advertising dollars.

Roku devices

What Lies Ahead 

With a looming recession and competition from ad sales to support forthcoming Ad-based tiers from both Disney+ and Netflix, where will Roku Channel ad support fit in? It will be interesting to see how this plays out.

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The streaming landscape is getting more complicated and, in the long run, there will be winners and losers. Roku hopes to be on the winning side. The key is providing the content and services at an affordable price or free ad-supported option that will attract enough viewers to satisfy investors. 

Big players in the streaming landscape, such as Roku, Netflix, Amazon, and Disney will not all of a sudden disappear, but it is apparent that streaming may no longer be the big cash cow everyone was hoping for as viewer dollars for subscription services may be spreading thin and free services may end up fighting for fewer ad dollars –  Within the next two years, things may look a little different. 

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1 Comment

1 Comment

  1. rl1856

    August 1, 2022 at 6:43 pm

    If only ROKU would enable their players to accept and pass through hi-res audio streaming files. ROKU software includes a “media” app which can read and access files from a NAS server. However anything above 16/44 is automatically downsampled and sounds mediocre.

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