Roku's Revenue Surges 58% on Pandemic-Fueled Streaming Boom

Roku's Revenue Surges 58% on Pandemic-Fueled Streaming Boom

Customers and marketers shift more of their attention away from TV and toward digital media

A person about to use the Quibi app on a smart phone in Los Angeles. Roku said it is expanding its library with shows from Quibi.
A person about to use the Quibi app on a smart phone in Los Angeles. Roku said it is expanding its library with shows from Quibi.

Roku Inc. reported a 58% increase in revenue during the holiday quarter, as the streaming-media service continued to benefit from customers watching more entertainment while stuck at home during the Covid-19 pandemic.

"We think the pandemic has accelerated, and permanently changed the curve on, the shift to streaming," Roku Chief Executive Anthony Wood said Thursday.

Consumption of at-home streaming video entertainment has boomed during the pandemic as consumers have diverted more of their time and money to platforms such as Roku, the leading streaming-video competitor, with about 30% of the market, according to Strategy Analytics.

Roku sells smart televisions with built-in streaming technology, as well as devices that users can plug into TVs. However, the company generates the bulk of its revenue by selling ads on streaming channels and taking a share of the streaming service's subscription revenue and ad inventory. The ad business has boomed as marketers, following their customers, are shifting more toward digital media.

The company's total revenue rose to $649.9 million in the fourth quarter, up from $411.2 million a year earlier. Revenue at Roku's platform business, which includes ad sales, jumped 82% to $471.2 million.

Overall, the streaming-media hub swung to a profit of $67.3 million, or 49 cents a share, from a loss of $15.7 million, or 13 cents a share.

Roku's shares were little changed in after-hours trading despite the better-than-expected results. The stock, which closed at $452.99, is trading seven times higher than its 52-week low in March.

Roku's player unit hit 51.2 million active accounts at year-end. Those accounts streamed an average of 3.8 hours a day in the fourth quarter, an increase of 10% year-over-year. Average revenue per user hit $28.76 for the quarter, up 24%.

In January Roku agreed to acquire multiyear exclusive rights to content from Quibi, a defunct subscription-supported streaming service for short-form programming, for less than $100 million. Roku will integrate the 75 Quibi series it acquired into the Roku Channel, its app for ad-supported movies and TV shows, Mr. Wood said.

Mr. Wood called the Quibi deal cost-effective and hinted that Roku would consider other reasonably priced acquisitions.

"We'll continue to look more broadly at all the different types of content that we can acquire, and we'll be disciplined about making sure that content purchase price fits into--whether it's licensed or purchased or whatever the financial details are--our [ad-supported video on demand] business model," Mr. Wood said.

Last year Roku made headlines for high-profile standoffs as it haggled over how to divvy up the spoils of major new streaming services. After a seven-month standoff, Roku finally got an HBO Max app just days before a hotly anticipated Christmas Day film release. In that deal, HBO Max parent AT&T's WarnerMedia didn't supply any content for the Roku Channel, and Roku pressed for a share of ad space in the service's coming ad-supported tier.

After a two-month standoff, Roku landed a Peacock app in September. In that deal, Peacock parent Comcast Corp.'s NBCUniversal gave Roku some ad inventory and licensed library content for the Roku Channel.

For the current first quarter, Roku projected revenue of $485 million, a 51% increase over a year earlier. Roku declined to provide guidance for the full year, citing uncertainty because of the pandemic.

The Trade Desk Inc., a digital-ad exchange and Roku rival for selling streaming TV ads, rode many of the same trends as Roku in 2020 to a record-setting year of its own.

The Trade Desk's revenue rose 48% to $319.9 million, and it posted a profit of $151.9 million, or $3.05 a share, compared with earnings of $50.9 million, or $1.06 a share, a year earlier.

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