Specialist
Former Senior Director at Roku Inc
Agenda
- Roku's (NASDAQ: ROKU) operating environment – account and ARPU growth expansion prospects for next 12-18 months
- Sizing revenue TAM based on CTV (connected TV) adoption, distribution dynamics with content producers and competitive landscape, highlighting Amazon (NASDAQ: AMZN) and Netflix (NASDAQ: NFLX)
- Ad-supported portion of ARPU and international mix’s impact
- Outlook for Q4 2021 and beyond – content investment focus areas around Quibi, plus downside risks
Questions
1.
Many of Roku’s future key growth drivers are around account growth and ARPU. Do you anticipate a slowdown in account growth over the next 2-3 years, given how well-penetrated Roku has become in the US and how international penetration might be much slower? What growth might the two sides experience over the next few years?
2.
Could international markets such as EMEA be the more attractive areas for Roku to tap into vs regions such as APAC or LATAM, where many streamers are rolling out mobile-only packs? Could any regional dynamics be headwinds?
3.
Do Amazon and especially Android have much better brand affinity outside the US, considering Roku benefitting from the TV OEM [original equipment manufacturer] deals in the US? The free-to-air broadcaster recognises the interest in other markets, but it would be competing against players such as Android and Amazon in the European distribution deals.
4.
You mentioned ad load being half as much as linear TV in some instances, but isn’t that a large value proposition touted by streamers, in that it’s more TV per hour and that’s why you should be willing to cut the cord? How transient is this dynamic? Will ad-supported streamers likely go back towards what has been typical ad load per hour on linear TV?
5.
Is there an inherent risk that the total pie could shrink because of the proportion of ad-free viewership and so the impression load will still struggle? Even if you do get back to parity with linear TV ad load, the majority of streaming viewership is ad-free, so that will take a significant proportion out of the CTV [connected TV] market.
6.
Could the international accounts have meaningfully low enough ARPU potential vs domestically, so if many incremental accounts come from outside the US, that will place some pressure on Roku’s current USD 36 ARPU?
7.
VMVPD [virtual multichannel video programming distributor] subscribers seem to have also had more material impact than the average account on ARPU. These have a much higher price point and potentially more hours engaged than streaming-only subscribers, given it’s largely linear TV over an OTT [over-the-top] structure, which contributes to a higher ARPU. How might YouTube TV’s current fallout with Roku impact Roku’s ARPU? Would you be worried about this and could there potentially be more to come with other vMVPDs?
8.
I resonate with 17-18% affiliate share on a typical distributor deal, where a programmer gives 17-18% of its inventory to a company such as Comcast or Spectrum. Where might this head, considering vMVPDs’ technicalities and Roku’s value perception?
9.
Would you put any ARPU ceilings in place for Roku over the next 2-10 years? Do the headwinds we discussed mean that ARPU might be more flat for the next few years or is enough going on that could lead to USD 50-60 ARPUs?
10.
We discussed the CTV ad market largely replacing the linear TV market. How much should we focus on the broader digital advertising ecosystem? This includes factors such as performance and social budgets – it’s more like a USD 300bn-400bn market – but are many advertisers considering a player such as Roku with ad medium in mind? What are the big obstacles for why these budgets are less inclined to spend with the company vs other options on the market?
11.
You mentioned the measurement piece that will drive much of the ROAS [return on ad spend], such as budget allocation. What’s going on with Nielsen dropping the ball there? NBCU and others are pressing the industry to collaborate elsewhere and get a gold standard in place, but how important is the management element to opening up these budgets to a much higher scale from a given advertiser? Who might lead the way in solving the measuring piece in an omnichannel world?
12.
You mentioned a chance we get more dynamic advertisements on a platform such as Roku with much higher targetability, such as more specific geotargeting. A lot of the data tracking that occurs for these OSs [operating systems] is with the ACR [automatic content recognition] data. We’ve brought up privacy a few times, so is that a first-party data area or identifier that may face privacy headwinds? Would you be worried about ACR tracking becoming more negatively regulated?
13.
The market seems to be intensifying competitively, whether it’s from Amazon and Android, as international becomes a bigger market, Comcast and Walmart potentially partnering or TV OEMs considering the market more closely, especially Samsung, LG and Vizio. Roku’s key benefit had always been its bespoke and wide-reaching OEM partnerships that give it distribution advantages. Has that also fallen to the wayside from all the players that are now focused on CTV?
14.
Players such as Samsung, LG and Vizio are operating in the more premium TV ASP areas. If Roku tried to partner with someone that’s selling a USD 1,000-plus TV, might the market share in these areas be off-limits for the company? Could the OEMs become increasingly interested in partnering with Roku?
15.
You said that some players Roku is partnered with are working towards the same things. Is there a risk of them getting better economics? They could go after the revenue-share component or be paid more marketing costs for the TVs. Are you worried about it being around those dynamics, where the relationship’s economics worsen for Roku? Or are the OSs not embedded enough, where some companies Roku’s partnered with might want to replace it with their own proprietary stuff over the next few TV cycles?
16.
We’ve talked about the USD 70bn market that CTV wants to replace, but it’s split across so many different players within the OS system or the platform side, as well as content players and ad tech partners. Who has the best potential to win the most market share?
17.
How slow a trend might programmatic be? The TV buyers have been so entrenched in the insertion order based buys. Might it be decades until we’re talking about 100% or at least the vast majority of CTV buys being delivered programmatically? What obstacles remain around getting buyers to come onto this more?
18.
Could programmatic gradually becoming a bigger part of the mix negatively impact CPMs? Many CTV buys are still done PMP [private marketplace] vs OMP [open marketplace], but to the extent that the market gets automated, would you expect CPMs to normalise at a meaningfully lower net-new level than what TV buys have resonated around recently?
19.
How has The Roku Channel’s evolution turned out for content owners, considering the value perception of filtering content into the platform relative to their own apps and channels? What has that meant for the increased value perception from advertisers around considering putting their dollars into The Roku Channel rather than working through Roku on behalf of the programmers they have applications for?
20.
I believe The Roku Channel has a reach of 70 million relative to 55 million active accounts, so the company is making good headway with filtering traffic. Will the goal be to use that broader reach to get targetable with players such as OneView around what can be done with first-party data? How should we think about the strategy around The Roku Channel and what was Dataxu in tandem?
21.
We talk about SVODs [subscription video-on-demands] and AVODs [advertising video-on-demands] a lot, but are there other OTT applications as Roku pursues the end goal of driving the hours per account per day or per month up, so that the platform is very highly engaged? Is the company doing enough with video streaming players such as YouTube and Twitch? Is it thinking enough about what’s new, perhaps also going into video gaming as a portal? What new application avenues can Roku place on the platform?
22.
Would you like to add anything else around Roku’s outlook over the next few years? Do you expect the company to be an industry winner or survivor vs loser?
