Roku wants to build on its early success, here’s how

For a business that formed its identity while creating a product for another company, Roku is a testament to going it alone and staying the course. The content platform and device maker (which once made groundbreaking hardware for Netflix) has evolved into an expansive media ecosystem of its own, with a market cap of over $14 billion.

It has by no means been a straight line to the business you see today: Once considered a media hardware provider Roku has transformed into a content town square for the masses. With its international expansion, this means choice for consumers and huge opportunities for advertisers.

Revenue Brew spoke with two leaders from the company on how it’s creating, and growing, revenue streams.

Take the lead, keep the lead

Roku Media President Charlie Collier pointed out that instead of building a streaming platform, his company has created an entertainment ecosystem. According to Comscore, Roku is bigger than the next​ two leading device brands, Amazon and Samsung, combined when it comes to streaming hours per CTV, or connected TV, device.

“Upon that scale, we focus on our viewers: How do we add value to their streaming experiences? What pain points can we solve through simplicity and delight that makes their experiences better here than anywhere else?” Collier told Revenue Brew via email.

At the center of the Roku ecosystem is the much traveled to, and much meme’d, Roku City—the moving purple cityscape that appears when the screen has gone idle. Collier said this feature reaches over 125 million people each day.

“We offer advertisers unique and creative ways to engage audiences and drive outcomes. From transforming Roku City into a stage for original artists like Demi Lovato, to original storytelling of all forms and formats, to themed takeovers of our home screen that engage users and elevate brands,” Collier said.

Hitting play on partnerships

The platform segment is the main driver of revenue for Roku, and nailing strategic partnerships is important. That’s where Tedd Cittadine, SVP of streaming services partnerships, comes in.

Cittadine ensures that the core value proposition—all the streaming services you want, all in one place—is made possible. He does this by navigating relationships with essential partners that have their own streaming platforms, like Apple and Amazon Prime.

“We at partnerships have one interest: to grow our partners’ business,” Cittadine said. “When our partners are successful, when they grow their revenue, we share in the upside and success.”

Cittadine says partnerships are especially key in the absence of Roku’s own major service (though the viewer growth of the ad-supported Roku Channel has been notable). In August, Roku also launched the ad-free streaming service named Howdy, which it has positioned as a more budget-friendly option.

Overall Cittadine said that he and his team know their lane right now, and are happy to run in it.

“No one is going to think Howdy can be a replacement for a tier-one service. But if you subscribe to something on Roku, that makes you a better customer, makes you more sticky,” Cittadine told Revenue Brew.

It’s worth remembering that Roku has invested in its own content. It has created its own brand, Roku Originals, which has been growing in recent years (you may have seen Weird: The Al Yankovic Story or Kevin Hart vehicle Die Hart).

Expert insight: the streaming industry

Kevin Westcott knows the media world better than most. Now retired, he spent over 16 years at Deloitte where his roles included global sector leader of telecom, media and entertainment, and sports.

According to Westcott, while Roku started as a hardware business, that segment now represents a small portion of the company’s business as it diversifies revenue coming from the platform side in the form of advertising, content distribution, the Roku Channel, and Roku OS licensing. He also lauded Roku’s strategy of cashing in on subscribers from other services and introducing those users to Roku content.

“In the past, I called Roku the sleeper streaming service, while the big services got all the press, Roku was building a large customer base and not a lot of people paid attention,” Westcott told Revenue Brew via email.

Now, according to Nielsen data, the Roku OS represented over 20% of all TV viewing time in the US in July, surpassing broadcast TV, and the Roku Channel was the fifth highest used streaming platform in May.

On Roku’s decision to launch Howdy, Westcott said it’s an interesting move that could help the company continue to grow the platform revenue. However, he said it’s too early to tell whether the company will be successful in penetrating a crowded streaming market.