Roku Has Strongest Quarter Ever As Viewers Flock To Streaming

Video streaming giant Roku experienced its strongest quarter ever as the COVID-19 pandemic fundamentally changed viewing behaviors in 2020 and fueled the shift to streaming.

In its Q4 2020 earnings call Thursday, Roku’s YoY revenue soared 58% to $650 million, while its platform segment – which includes advertising and content distribution revenue – grew 81% YoY to a record $471.2 million, driven by strong advertising demand. The company also took in $65.2 million in net income in Q4, easily exceeding Wall Street earnings estimates and surpassing the company’s own outlook at the start of last year.

Additionally, Roku added 14.3 million incremental active accounts in 2020 to reach 51.2 million at year’s end – putting it neck and neck with Amazon Fire TV, which also exceeded 50 million monthly active users in December – while streaming hours increased by 20.9 billion hours YoY to a record 58.7 billion.

By the end of Q4, Roku had clinched a deal with WarnerMedia to add its HBO Max streaming service to the platform, and kicked off 2021 with the acquisition of Quibi's content rights for under $100 million, as it moves to beef up its free AVOD business.

“The progress that was made in 2020, with more and more viewers shifting to streaming for their TV, more advertisers following their viewers to streaming, and more content companies launching major new streaming services, these are enduring structural changes,” CEO Anthony Wood said. “We think the pandemic has accelerated and permanently changed the curve on the shift to streaming.”

Roku again saw strong advertising growth in Q4, more than doubling monetized video ad impressions on a year-over-year basis, up over 100% and rebounding to pre-COVID levels.

Scott Rosenberg, Roku’s SVP and GM of its platform business, said that the growth of Roku’s ad business was a result of ongoing “major secular changes” accelerated by the pandemic. Traditional TV saw a 21% decline in primetime broadcast ratings last year – even as rates in the upfronts increased 13% due to scarcity – and the median age of viewers of the top three broadcast networks is now over 60.

Meanwhile, half of the viewing among adults age 13 to 34 is spent in streaming and a third of all US households are cord cutters, which is driving a major shift to OTT. In Q4, Rosenberg said that the six largest agency holding companies more than doubled their OTT spend with Roku, the same agencies that control the majority of TV ad spending.

“This pattern is not sustainable for TV marketers,” he said. “And the pandemic really accelerated the decision by marketers, by advertisers, to right-size their investment towards streaming.”

The company is in growth mode as it increases the scale of its platform and builds out original content on The Roku Channel – with content from Quibi set to roll out this year – as the company considers further acquisitions to fuel its pipeline.

The Roku Channel reached an estimated 63 million people in US households in Q4, up more than 100% year-over-year, and added more than 50 linear channels.

“The Roku Channel is benefiting from this virtual cycle of … more advertising dollars, more content and more viewing,” Wood said. “It’s growing faster than the platform overall – double the rate of the platform, which is also growing quite nicely. The big picture is we’re focused on an AVOD business model, which means licensing or sourcing content that’s profitable on an AVOD ad-supported basis. As our scale grows, we have more options with the type of content that we can source that matches that, whether it’s licensing or an acquisition of local content rights like we did with Quibi.”

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