Roku: The Trojan Horse of streaming

Yesterday, Roku — the streaming device provider — reached a deal to keep Youtube on its platform.

What’s the big deal? Roku and Youtube were disputing for months on what terms to include Youtube’s services inside Roku’s devices.

• Roku’s POV: Youtube wanted unfair terms like prioritized search results.
• Youtube’s POV: Roku used its market power to negotiate better terms.

Since its founding in 2002, Roku has grown into a dominant force with 38% of the US smart TV operating system market — surpassing even Apple TV and Amazon’s Fire TV. So how did Roku — once a small competitor — become such a dominant player in streaming?

The trojan horse: While Netflix went the streaming route, Roku led with its Roku devices and TVs — which hosts other streaming services. But that was only the beginning…

• 4 years ago, Roku launched Roku Channel — its own free ad-supported streaming service with content licensed from other networks.
• Last month, Roku announced plans to develop 50 original shows in the next two years.

With 56.4M active accounts — Roku’s reach is still a fraction of Netflix’s 214M subscribers. Roku has also struggled to expand beyond North America — with only 6.4% of the global market share.

Looking back: It’s been a difficult year for Roku’s stock — down 48% from its 2021 highs. Like many stocks benefiting from COVID — Roku’s growth slowed over the past year with supply chain issues impacting device sales.

One stat: This is the third time Roku fell over 50% within 4 months since its IPO in 2017 — but its stock is still up 839% since.