Subscribe for full access to The Hollywood Reporter
Subscribe for full access to The Hollywood Reporter
The tech firm faces increasing competition on the streaming advertising side, as Netflix and Disney grow ad tiers and Pluto and Tubi offer free services, and may get a new rival on the smart TV-manufacturer front.
By Caitlin Huston
Business Writer
Despite a fourth-quarter earnings beat, growing engagement on the streaming platform to 80 million active accounts, Roku’s stock tumbled more than 20 percent a day after the Feb. 15 earnings announcement.
While some analysts continue to believe Roku is just facing some growing pains amid a recovering advertising market, others think the company is now at a turning point in the streaming wars.
“Recently, we believe that there is a strong and growing body of evidence that supports the view that Roku is at the precipice of being squeezed by the emergence of challengers on all flanks,” MoffettNathanson analyst Michael Nathanson wrote.
This view comes as Roku faces increasing competition on the streaming advertising side, with growth in the new ad-supported offerings from Netflix and Disney and free, ad-supported offerings such as Pluto and Tubi. Amazon’s rollout of advertising in late January to all of its Prime Video viewers adds another strong competitor.
Roku introduced its own line of branded TVs in 2023, as a way to handle the shift from devices to smart TVs, but Nathanson said he believes Roku now faces the “difficulty of holding operating market share” with Amazon and existing large original equipment manufacturers that may just want to make the TVs themselves.
And a new potential competitor could be on the horizon, with the rumored acquisition of Vizio by Walmart. The Wall Street Journal reported Feb. 13 that the retail giant and the smart TV-manufacturer had held talks, setting up the potential for an advertising and manufacturing behemoth.
“If indeed Walmart is successful in acquiring Vizio, we would expect that their unrivaled relationship with the world’s largest brands and their treasure trove of shopping data will also present a significant challenge to Roku’s incumbency,” Nathanson said.
Though he said that he could not comment on a rumor, Roku CEO Anthony Wood said during the company’s earnings call that he believes Roku remains well-positioned in the space, even with the potential new entrant.
“We have a great relationship with Walmart. We have a great relationship with lots of retailers. We have strong distribution both inside and outside the United States. We have a large, engaged customer base,” Wood said.
While acknowledging “near-term challenges in the macro environment and an uneven ad market recovery,” Wood also emphasized plans to grow revenue and cash flow at the company over time and to turn 2024 into a year of “innovation and growth.” Some analysts are holding to that promise, and still view Roku as an early leader and innovator in the streaming space. However, as noted by Macquarie analyst Tim Nollen, morale has taken a hit.
“Roku is well positioned as the U.S. device share leader to capture CTV ad dollars, underpinned by continued strong engagement metrics. Performance has been mixed for many Qs now, however, dampening enthusiasm somewhat,” he wrote in a Feb. 16 note.
Sign up for THR news straight to your inbox every day
Sign up for THR news straight to your inbox every day
Subscribe for full access to The Hollywood Reporter
Send us a tip using our anonymous form.