Roku, Inc. (Roku) operates as a TV streaming platform in the United States, Canada, and Mexico by hours streamed.
The company pioneered streaming to the TV. And that all TV will be streamed. The shift of the TV ecosystem to streaming continues and is expanding TV’s capabilities for viewers, content partners, advertisers, and other industry participants. Nearly every major media company not only has a streaming service but has also expanded beyond pure subscription streaming models to ad-support...
Roku, Inc. (Roku) operates as a TV streaming platform in the United States, Canada, and Mexico by hours streamed.
The company pioneered streaming to the TV. And that all TV will be streamed. The shift of the TV ecosystem to streaming continues and is expanding TV’s capabilities for viewers, content partners, advertisers, and other industry participants. Nearly every major media company not only has a streaming service but has also expanded beyond pure subscription streaming models to ad-supported streaming options.
Strategy and Business Model
The foundation of the company’s platform is the Roku TV OS, which is purpose built for TVs and powers Roku streaming devices. The Roku TV OS is designed to run on low-cost hardware, which enables Roku streaming devices to be sold to consumers at competitive prices. The Roku TV OS connects viewers to the company’s streaming platform via a broadband network, giving them access to a wide selection of content through an experience that is both delightful and easy to use. The company provides periodic updates via the Roku TV OS to continuously deliver an exceptional streaming experience.
The company dedicates significant resources to build, maintain, and advance the Roku TV OS; to provide an industry-leading streaming platform for its viewers, content partners, and advertisers; to obtain content for its streaming platform that attracts viewers, including its own original programming (Roku Originals); and to extend Roku’s leadership as the global shift to TV streaming continues.
The company’s three-phased business model—grow scale, grow engagement, and grow monetization. The company leverages its position as the TV streaming platform to help its viewers find content across the streaming universe, while simultaneously growing monetization. The company’s three key initiatives to grow platform revenue are to innovate the Roku Home Screen to expand monetization, grow advertising demand through deeper third-party platform integrations, and grow Roku-billed subscriptions.
Segments
The company operates through two segments: Platform and Devices.
Platform segment
This segment engages in the sale of digital advertising (including direct and programmatic video advertising, ads integrated into its UI, and related services) and streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls). The Platform segment: growing and monetizing user engagement.
The Roku Experience
The company calls the user experience on the Roku platform the ‘Roku Experience.’ It represents all the features that Roku builds and operates to engage, delight, and help its viewers find great entertainment. The Roku Home Screen is the first thing the company’s viewers see when they start streaming, and from this position, it can help the viewer decide what to watch every day across the vast range of options available to them on its streaming platform.
As an example, sports are an important entertainment category for viewers and advertisers, and Roku is focused on benefiting from its ongoing shift to streaming. Available from the Roku Home Screen Menu, the Roku Sports Zone organizes sports programming in a single location, and its features are integrated throughout the Roku Experience. The company partnered with the NFL to launch its first league-branded zone in 2023, and in 2024 it added zones for the NBA and MLB. The company also has zones for college football, college basketball, and women’s sports, among others. Each zone helps viewers find live and upcoming games and related content such as previews, highlights, commentary, and documentaries. In addition to sports, the company builds viewer experiences around popular entertainment genres like home improvement and food and tentpole events like the Olympics and the Oscars.
The Roku Channel
Another top engagement driver on the company’s streaming platform is The Roku Channel, its owned and operated streaming app. The Roku Channel aggregates a broad variety of entertainment into a unified streaming experience, through three distinct types of content:
AVOD (ad-supported video on demand): Viewers can stream a broad variety of 80,000+ movies and TV shows, including Roku Originals, for free.
Live TV: Viewers have access to watch 500+ FAST (free, ad-supported linear streaming TV) channels in genres ranging from news to sports to entertainment to creator content.
Premium Subscriptions: Viewers can easily sign up, view, and manage subscriptions to dozens of SVOD apps, such as Max and Paramount+, with a single, monthly bill.
The foundation of the company’s content strategy for The Roku Channel is third-party licensed content and, to a smaller extent, its original programming, Roku Originals. The company’s content spend is intended to be commensurate with the growth trajectory of The Roku Channel and with the broader macroeconomic environment. The Roku Channel is available on devices powered by the Roku TV OS in the United States, the United Kingdom, Canada, and Mexico. In the United States, it is also available via the Roku mobile app, online at TheRokuChannel.Roku.com, and on Amazon Fire TVs, Samsung TVs, Google TV, and other Android TV OS devices.
Owning and operating both The Roku Channel and the company’s streaming platform creates unique value, making it a leader in free content, positioning it to be a valuable partner to content partners, and providing a large source of advertising inventory. The Roku Channel is a core strategic asset in its monetization efforts that simultaneously benefits viewers, content partners, and advertisers, while generating platform revenue.
Streaming Hours
The company is always seeking new ways to innovate to expand the role the Roku Experience can play in helping viewers find what to watch, which simultaneously benefits its content partners and advertisers while creating monetization opportunities for Roku.
Platform Revenue
The company’s TV streaming platform enables content partners and advertisers to reach audiences that are increasingly unreachable on traditional TV. Each user on the company’s streaming platform creates multiple revenue opportunities for Roku through activities such as navigating through the Roku Experience, watching ad-supported content, or signing up for subscription services.
The company generates platform revenue primarily from the sale of digital advertising (including direct and programmatic video advertising, ads integrated into its UI, and related services), as well as streaming services distribution (including subscription and transaction revenue shares, the sale of Premium Subscriptions, and the sale of branded app buttons on remote controls).
The company empowers viewers to choose how much they want to spend on content by offering them a broad array of free, ad-supported, subscription, and transactional viewing options. The company’s direct relationship with customers provides it with insights about their behavior on its streaming platform, including certain content viewers search for, the apps viewers install and watch, and the types of content that viewers purchase or subscribe to on its streaming platform. This first party data enables it to develop actionable insights, such as content recommendations to improve its viewers’ experience.
In 2024, the company added a new personalized content row powered by AI to the Roku Home Screen. Unlike suggestions from streaming services, which are restricted to their libraries, its recommendations include content from streaming apps across its platform. This content row is designed to recommend TV shows and movies to viewers while simultaneously driving growth for Roku in areas, such as Streaming Hours, SVOD signups, and ad reach.
The company’s significant scale, ability to reach highly engaged viewers, tools that enable seamless signups, and marketing/discovery features make it an attractive platform to content partners. They can also reach and engage those viewers who do not use traditional TV services. As more viewers shift to TV streaming, content partners that publish apps on its platform are able to reach these streaming audiences at scale and engage viewers directly.
The company makes it easy for content partners to distribute and monetize their streaming content through three primary business models: SVOD, which includes subscriptions to individual video on demand apps and so-called virtual multichannel video programming distribution (‘vMVPD’) services; ad-supported video, which includes AVOD apps with on demand content that do not charge a subscription fee to users, as well as FAST; and transaction video on demand (‘TVOD’), which includes apps that offer a la carte content purchases or rentals. The company’s billing service assists content partners with their billing needs, such as managing payment methods, subscriptions, and customer invoices. This service also allows content partners to enable a frictionless signup within their app.
Content partners also have access to the company’s media and entertainment tools to help them attract, engage, and retain viewers by investing in promoting their content on its streaming platform. Content partners can use a variety of ad types, such as native display ads on the Roku Home Screen to drive app downloads, promote an app’s content, or direct traffic to their apps in order to drive subscriptions or movie and TV show consumption. The company also derives revenue from the sale of branded app buttons on Roku remote controls that are intended to increase incremental usage of an app by enabling viewers to launch straight into the app from any screen. The company’s analytics and reporting assist content partners with analyzing viewership trends and metrics for specific titles, and it also can help content partners target new audiences that are more likely to subscribe to their services.
Just as ads evolved decades ago when TV replaced radio as the primary entertainment medium, ads on TV streaming offer new and more performant opportunities than traditional TV. Advertisers are able to leverage the combination of the company’s significant scale, its direct relationship with viewers, and its innovative ad products and technology to reach consumers with relevant messages. The company offers advertisers a unique and effective set of tools to reach viewers and measure both the effectiveness of the ads served and their return on investment.
The company sells both in-stream video ads and display ads integrated into its user interface (‘UI’). The company’s standard in-stream video ads are the same as the video advertising seen on traditional TV, but they are made more performant with data and technology. Additionally, the company is able to offer a broader array of ad experiences than standard video ads, such as the ability to takeover an entire ad break, ads related to a specific Roku Original, and ads that appear when the viewer pauses content.
The display ads the company offers are integrated into the Roku Experience and are only possible because it is the streaming platform. These differentiated ads fall into three main categories of native ads, native destinations, and action ads. Native ads are high-visibility placements within its iconic Roku City screensaver, wallpaper-branded themes on the Roku Home Screen or The Roku Channel, spotlight ads (placed directly below the Roku Home Screen Menu), or marquee ads (placed directly to the right of the app tiles on the Roku Home Screen Menu) which can be either static or video. Native destinations include sponsorships of a playlist, zone (e.g., the Roku Sports Zone), fan experience (e.g., the premiere of a new TV show season), or a ‘pass’ that provides viewers with a free movie/TV show. Action ads can be combined with other ad types and create an easy way for viewers to use their remote to subscribe to a service, purchase an item, or receive more information (e.g., OK-to-Text, OK-to-Checkout). Many of the company’s action ads are in partnership with companies, such as Walmart, Shopify, and Instacart that connect their products with viewers and provide enhanced targeting and closed-loop measurement.
Roku enables advertisers to measure TV streaming ad performance throughout the Roku Experience. The company’s measurement framework is built on a foundation of verified identity, consisting of direct relationships with viewers. The company can combine this asset with the advertiser’s preferred data sources to provide an expansive measurement toolkit that includes reach measurement, brand resonance, and sales attribution, among others. The company also has partnerships with companies, such as iSpot.TV that allow advertisers to buy, optimize, and measure their campaigns, whether directly through Roku or through another buying platform.
Devices segment
This segment engages in the sale of streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories. The Devices segment providing easy access to TV streaming.
The company makes TV streaming accessible to consumers through a broad lineup of devices, at a variety of competitive price points. The company’s devices segment generates revenue from the sale of Roku streaming players, Roku-branded TVs, smart home products and services, audio products, and related accessories.
Roku TV models are TVs made and sold by the company’s Roku TV partners, which are TV original equipment manufacturers (‘OEMs’) that license the Roku TV OS and leverage its smart TV reference designs. The company has driven strong Streaming Household growth through this Roku TV licensing program, which the company launched more than 10 years ago.
In 2023, the company launched Roku-branded TVs, which are designed, made, and sold by it. This award-winning lineup includes the Roku Select and Roku Plus Series TVs, and the Roku Pro Series TVs, which are the company’s higher-performing TVs that it launched in spring 2024. Roku-branded TVs complement the company’s successful Roku TV licensing program. The company’s Roku-branded TVs will enable it to further grow its leadership position in TV streaming and compete in the higher-end range of performance TVs. Roku-branded TVs will also help the company innovates more quickly in all aspects of hardware and software and test directly with viewers, improving the product and viewer experience and strengthening the entire Roku ecosystem.
Roku streaming players enable users to easily turn (nearly) any TV into a smart TV. The company launches new streaming player models periodically with a focus on offering high performance at an affordable price. In September 2024, the company launched its most powerful streaming player to date: the 2024 Roku Ultra. This premium streaming player comes bundled with the Voice Remote Pro (2nd edition), the company’s most advanced remote.
Roku streaming devices are broadly distributed at popular national retailers, such as Amazon, Best Buy, Costco, CVS, The Home Depot, Lowe’s, Sam’s Club, Target, Walgreens, and Walmart.
Audio is an important part of the TV streaming experience, and the company offers Roku-branded wireless speakers and subwoofers that seamlessly connect to TVs powered by the Roku TV OS. Additionally, Roku TV Ready allows certified soundbars to quickly and easily connect to Roku TVs, enabling the use of one remote and having all the sound settings uploaded to the TV. This is another example of Roku’s innovative TV ecosystem.
The Roku ecosystem extends beyond TV streaming and audio to smart home devices that include cameras, video doorbells, lights, plugs, a home monitoring system, and the company’s Roku Smart Home mobile application for iOS and Android. Similar to its TV streaming business model, the company builds scale by selling Roku Smart Home devices and then monetize through smart home services. The company offers subscription plans for its cameras, video doorbells, and home monitoring system.
Through its streaming devices and the Roku platform, the company provides viewers tremendous choice, value, and an exceptional viewer experience.
Business Growth
Investment in Growth
The company must regularly update and enhance its streaming platform to meet evolving viewer behavior and provide a best-in-class content delivery and advertising platform. The company must provide content partners with best-in-class publishing tools and actionable audience insights. The company must continue to innovate and invest in its advertising capabilities and technology so that it attracts and encourage incremental advertising spend on the company’s streaming platform.
Advertising Innovation
The company continues to innovate its advertising offerings. On the Roku Home Screen, the company recently enhanced its marquee ads from static display to video. This new video capability has attracted diverse brands and verticals, such as tech, financial services, quick-service restaurants, retail, consumer packaged goods, and auto. This is part of the company’ ongoing effort to diversify display ads on the Roku Home Screen beyond media and entertainment advertisers. The company is working to offer video in the marquee ads to more brands, while continuing to deliver a delightful user experience.
As part of the company’s efforts to grow advertising demand, it is making it easier for advertisers to execute campaigns programmatically by expanding and deepening its relationships with third-party platforms, including demand-side platforms (‘DSPs’), supply-side platforms (‘SSPs’), retail media networks, measurement, and other strategic partners. The Trade Desk (‘TTD’) represents its deepest integration to date with a DSP. Additionally, Roku has adopted Unified ID 2.0 (‘UID2’), an identity solution developed by TTD, that allows advertisers to deliver more personalized ad experiences across Roku’s inventory and devices at scale.
The company has also expanded its ad offering to better serve small and medium-sized businesses (‘SMBs’). Roku Ads Manager, launched in September 2024, is its self-service connected TV advertising solution, providing performance features like advanced targeting, conversion optimization and measurement, and shoppable ad formats. This solution builds on the company’s growing list of ad offerings that provide advertisers with more choices with regard to how they buy Roku Media – whether through direct IO (insertion order), a preferred DSP partner, or self-service. This allows the company to serve a diverse array of advertisers across verticals and business sizes, from SMBs to enterprise companies.
International Markets
Roku streaming devices are available in 15+ countries. The company is a leading TV streaming platform in the United States, Canada, and Mexico by hours streamed.
Internationally, the company continues to grow its footprint and deepen its presence in key markets. In Latin America, the company announced Roku TV models with Multi in Brazil; Kalley in Colombia; RCA in Chile; and Sharp, Caixun, and Hyundai in Peru. In the United Kingdom, the company announced new Roku TV models with CHiQ, JVC, Veltek, and Logik and launched Roku TV models with Westinghouse. In international markets, the company plans to continue to focus on building scale first, increasing engagement, and ultimately driving monetization.
The company is successfully growing The Roku Channel audience internationally. The Roku Channel is available on devices powered by the Roku TV OS in the United Kingdom, Canada, and Mexico. Mexico remains the channel’s largest market outside of the United States by Streaming Households and Streaming Hours. With strong scale and engagement, the company is working to grow monetization in Mexico.
Sales and Marketing
The company engages in a wide variety of sales and marketing activities to continuously grow scale, engagement, and monetization and dedicate significant resources to this area. The company’s sales and marketing activities are primarily focused on building and expanding relationships with content partners, advertisers, TV brands, and retailers, and driving sales of its products and its licensed Roku TV partners’ products to consumers through retail distribution channels.
The company has dedicated business development teams that develop and maintain relationships to promote and build awareness of the features and advantages of its streaming platform among content partners, advertisers, and TV brands. The company’s data science team supports its sales and marketing efforts by analyzing data on its streaming platform to increase effectiveness for its content partners and advertisers, as well as for its consumer marketing campaigns. The company’s relationship with content partners is typically client-direct. Through the company’s dedicated content partner relationship management team, it enters into agreements with content partners to distribute their apps on its streaming platform, or license their content for The Roku Channel, or both. As part of the company’s distribution agreements with AVOD apps, it typically secure direct access to a portion of the content partners’ video advertising inventory for its monetization, and its sales efforts are differentiated and complementary to that of its content partners. Whereas the company’s content partners typically feature their brand and content in their sale, it focuses on delivering a large streaming audience across many apps and via other Roku-branded experiences, such as the Roku Home Screen at once using its own data. The company sells advertising to a wide range of advertisers helping them reach their goals across numerous key performance indicators.
The company is developing relationships with more third-party ad-buying platforms (e.g., retail media networks, DSPs, SSPs, and other strategic partners) to reach marketers buying programmatic advertising on such platforms and to create more demand opportunities for its advertising inventory. The company’s ad sales teams and products are organized into groups that specialize in the unique needs of each area: agency holding companies and Fortune 500 brands; independent agency and mid-market clients; content partners and entertainment brands; performance and direct-to-consumer brand; and international markets.
The company works with its licensed Roku TV partners to assist in all phases of the development of Roku TV models, including planning, manufacturing, and marketing. In the United States, the majority of the company’s products and its licensed Roku TV partners’ products are sold through traditional brick and mortar retailers, such as Best Buy, Target, and Walmart, including their online sales platforms, and online retailers, such as Amazon, and to a lesser extent its website (excluding Roku TV models). The company also sells products internationally through distributors and to retailers. Amazon, Best Buy, Walmart, and Target its devices for the year ended December 31, 2023. The company’s supports retailers with an experienced sales management team and work closely with these retailers to assist with marketing and product mix forecasting. The company intends to continue to invest significant resources in its sales and marketing efforts.
Seasonality
The company has historically seen seasonality in its business related to advertising and device sales. The company’s revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a higher percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons. Furthermore, in preparation for the fourth quarter holiday season, the company recognizes significant discounts in the average selling prices of its streaming device sales through retailers in an effort to grow its Streaming Households, which typically reduce its devices gross margin or results in a devices gross loss in the fourth quarter (year ended 31 December 2024)
Manufacturing
The company outsources the manufacturing of its products to its contract manufacturers, original design manufacturers, and other contractors and vendors. All of the Roku’s products are manufactured in China, Southeast Asia, Brazil, and Mexico. The company’s contracts do not obligate its partners to supply products to it in any specific quantity or at any specific price. The company’s manufacturers procure components and assemble its products to demand forecasts. The company establishes based upon historical trends and analysis from its sales, operations, and product management functions. The manufacturers ship the company’s products to its third-party warehouses, from where the company ships its products directly to retailers, wholesale distributors, and consumers.
Intellectual Property
As of December 31, 2024, the company had approximately 1,500 issued patents and 600 pending applications in the United States and foreign countries.
Competition
Large companies, such as Amazon, Apple, and Google offer TV streaming devices that compete with Roku streaming devices and those of the company’s licensed Roku TV partners and the Roku TV OS.
History
Roku, Inc. was founded in 2002. The company was incorporated under the laws of the state of Delaware in 2002.
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