Rocky Times at Roku in Q2 2022: Is digital streaming in trouble?

Roku has a huge presence in the streaming environment, their platform is used not only in their plug-in devices (streaming stick, box), but also in multi-brand TVs and even in Roku and Roku-made soundbars. Walmart (ONN). In addition, Roku provides content through its own name Roku Channel.

Tip: The Roku Channel on Roku devices and the Roku mobile app.

It’s all about the money

Although Roku dominates the market for streaming devices and operating systems, this significant presence has not made it immune to current trends. weaker than expected 2022 second quarter financial results.

Interestingly, although the second quarter results were lower than expected, the trend was still slightly positive:

Total net income increased 18% to $764 million compared to the prior year
The platform’s revenue increased 26% to $673 million compared to the previous year
Gross profit increased 5% to $355 million compared to last year
It added 1.8 million incremental active accounts to reach 63.1 million
It was 20.7 billion hours, which is 0.2 billion hours less than in the previous quarter
Average revenue per user (ARPU) increased to $44.10 (on a trailing 12-month basis), a 21% year-over-year increase.
We received a billion dollars in advance advertising commitments.

As a result of the lower-than-expected numbers, second-quarter revenue expectations fell short. Revenue was expected to be $805 million, but it was $764 million. The first reaction of the investors was the almost 25% drop in the share price in one day! American bank placed Roku in the “underperform” category.

Tip: In the financial world, a slower growth trend can be just as devastating as a loss, as it can signal problems with the long-term health of a company or the market as a whole.

Survival strategy

Unlike Netflix, however, Roku appears to be better prepared knowing that its growth will slow. The main contributor to their Q2 results appears to be lower ad spend from business clients compared to viewership growth ($1 billion upfront commitment not enough). A slight drop in viewer hours doesn’t help either, as more viewers are needed to attract more ad dollars.

So far, Roku hasn’t imposed mass layoffs or a hiring freeze, instead seeking to slow new content acquisitions and releases, as well as the pace at which new content is created, acquired, and released.

Positive signs

Despite the current downturn, Roku expects to grow its position based on the continued trend of ad dollars migrating from traditional TV to streaming while the number of active Roku accounts continues to grow.

In addition, Roku has signed a streaming deal with Lionsgate and is in the process of signing a streaming deal with STARZ that will add more content to the Roku Channel and hopefully attract more advertising money.

What awaits us

With a looming recession and competition for ad sales to support the ad-based tiers of both parties Disney+ and Netflix, where will Roku Channel’s ad support fit in? It will be interesting to see how this plays out.

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The streaming landscape is increasingly complex, and there will be winners and losers in the long run. Roku hopes to be on the winning side. The key is to provide content and services at an affordable price or a free, ad-supported option that attracts enough viewers to satisfy investors.

The big players in the streaming world like Roku, Netflix, Amazon, and Disney aren’t going to disappear suddenly, but it’s clear that streaming is no longer the big cash cow that everyone hoped it would be, as viewers’ dollars for subscription services. and the proliferation of free services may fight for fewer advertising dollars – Things may look a little different in the next two years.

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