“And I think over time, most (library) content in the world will come to Roku on demand through the Roku channel.” – Anthony Woods, CEO, Roku
This past week there was probably no one happier than Roku investors. After its first day of trading as a public company, Roku’s shares shot up 67%, closing at $23.50 after opening at $15.78. Still, despite the monumental win, CEO Anthony Woods isn’t obsessing over the numbers. Instead, Wood’s eyes are focused on continuing to expand the reach of its platform. Currently, Roku has 15 million active accounts and is growing 40% year-over-year, but as Woods sees it, there are a lot more house holds in the US than 15 million, which means Roku has a lot of growing to do, especially in driving revenue.
Despite users streaming more than 3 billion hours of content on the device each quarter, most of those streaming hours don’t impact Roku’s bottom line– not even Netflix, which accounts for a third of Roku’s streaming hours. Though Roku monetizes every customer, it only generates about $11.22 per active user. Because of this, one thing that we’ll see Roku focus on during its continued expansion, is its fairly new ad-supported streaming service titled “The Roku Channel.”
The Roku Channel offers the company a new way to increase its revenue and attract customers by offering something that only Roku can offer — a Roku-Branded Ad-supported streaming service.
“Ad-supported content is the fastest-growing type of Roku content,” explained Woods in a recent interview with Variety. “40 percent of viewing on Roku has ads in them.”
This percentage means that consumers don’t necessarily mind watching ads if it can save them a little extra change. And this growing love for “free” ad-supported content can serve Roku well, especially if they decide to pre-install the channel on all its devices.
“As consumers increasingly cut the cord and move to streaming, they are not looking to pay the same amount that they paid for their pay TV bundle they just cancelled. They are looking for better value. The behavior that we expect is that consumers will sign up for a few subscription services, but then they will layer on a lot of ad-supported content,” said Woods. “And as streaming becomes even more mainstream, consumers are looking for more free content. Free is one of the most searched-for terms on Roku.com.”
The company has already struck licensing deals with Lionsgate, MGM, Sony Pictures Entertainment, and Warner Bros to bring to the service such films as “Ali,” “The Karate Kid” and “Legally Blonde.” Roku is also working with companies that already have channels via its platform, including American Classics, Fandor, FilmRise, Nosey, OVGuide, Popcornflix, Vidmark and YuYu, to help spotlight their free programming.
“I think over time, most (library) content in the world will come to Roku on demand through the Roku channel,” Woods added.