Roku late last week followed through on years of speculation and officially filed for an initial public offering in hopes of raising $100 million. But beyond the IPO, Roku—a company popular for making relatively inexpensive streaming devices—is placing much of its future success on its platform.
“Our mission is to be the TV streaming platform that connects the entire TV ecosystem. We connect consumers with the content they love. We help content publishers find their audience and make money. We are pushing TV advertising out of the 1940s—when Bulova watches launched the first TV ad—and into the data-driven, machine learning, era of relevant and interactive TV ads. We partner with TV brands and service operators so they can thrive in this rapidly changing ad world,” said Roku CEO Anthony Wood in the company’s SEC filing.
“I believe that just like mainframe operating systems didn’t transition to PCs, and just like PC operating systems didn’t make the transition to phones (is your phone powered by Windows?), TVs will be powered by a purpose-built operating system optimized for streaming.”
Indeed, while Roku’s streaming devices still account for the majority of the company’s revenue, revenue from Roku’s platform more than doubled in 2016 as compared with 2015.
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But Roku acknowledges that future growth for its platform revenue hinges on ad-supported content viewing.
“To date, the majority of the hours streamed on our platform have consisted of subscription video on demand content; however, in order to materially increase the monetization of our platform through the sale of advertising-supported video, we will need our users to stream significantly more ad-supported content. Furthermore, our efforts to monetize our platform through ad-supported content is still developing, and may not grow as we expect,” the company warned in its filing.
The majority of the content streamed across the Roku platform comes from major SVODs like Netflix. But the revenue that comes from Roku’s relationship with Netflix is immaterial, and Roku does not expect that to change in the foreseeable future.
And so Roku’s future may rest in the hands of the numerous virtual MVPDs like Sling TV and DirecTV Now that have cropped up over the past few years, as well as other factors.
“We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband Internet access, the quality of broadband content delivery, the quality and reliability of new devices and technology, the cost for users relative to other sources of content, as well as the quality and breadth of content that is delivered across streaming platforms,” Roku wrote.
Roku is also taking matters into its own hands by launching an ad-supported video streaming channel. The Roku Channel, which is getting a phased rollout over the next few weeks, will offer feature films and content from existing channel publishers.