Interview Synopsis

Roku – content strategy and growth opportunities

  • Public Equity
  • TMT
  • North America

Streaming platform Roku beat Wall Street estimates in Q3 2022, adding 2.3 million streaming accounts. However, a bleak outlook for Q4 sent its share price tumbling. According to a former executive at Roku, the company will continue to face headwinds from the likes of Amazon and Google and their subsidised hardware but could benefit from the growing spending power of younger consumers.

Can Roku compete with Amazon and Google?

In an Interview with Third Bridge Forum, the specialist said the biggest trends for streaming platforms are the transition from subscription apps to function-as-a-service and market consolidation. We heard that macroeconomic conditions could cause advertising revenue to drop from streaming platforms. Click here for more of our expert insights on streaming platforms. But they said lower-funnel platforms like Roku are expected to be better insulated from such changes than others. The specialist told us that households are likely to begin “cord cutting” as the global recession begins to bite. However, they added this could again benefit streaming platforms like Roku. 

The specialist told us Roku has been slow to expand internationally given its brand awareness is weaker vs competitors like Amazon. They said it will be an “uphill battle” to enter new markets but claimed the UK offers a good opportunity for the company – potentially in collaboration with Sky UK Limited. 

The specialist said in the US, Roku envisages a future where all TV will be streamed – aided by Millenials and Gen Z consumers who are unlikely to pay for “triple-play packages”. Although this could benefit Roku, the specialist said it faces competition from streaming platforms like Amazon and Google which build their own hardware and are subsidising price points that Roku could struggle to match. 

In the Interview the specialist also revealed that Roku is diversifying its revenue streams by dipping its toes in content creation and the smart home sector. This, they said, is in response to Amazon’s success in both fields. While Roku does not have the budget of  Netflix, Apple, HBO, Disney or Amazon, the specialist said developing original content could help with Roku’s stickiness and ensure customers do not tune into competitors Tubi and Pluto. On smart devices, the specialist said Roku’s partnership with Walmart could just be the start and that it would not be unthinkable if it made M&A moves to aid its expansion in the sector. 

Roku itself could become an M&A target for telecommunications companies like Comcast, Charter Communications or Versions Communications, we were told. And at the current share price, the specialist speculated that companies could be tempted to make a move. 

Click here to access all the human insights in the Third Bridge Forum Interview, “Roku – Content Strategy and Growth Opportunities”.

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The information used in compiling this document has been obtained by Third Bridge from experts participating in Forum Interviews. Third Bridge does not warrant the accuracy of the information and has not independently verified it. It should not be regarded as a trade recommendation or form the basis of any investment decision.

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