A reassessment of Roku

[SaulR80683]

After being seduced by Roku’s great “story,” and a lot of enthusiasm on the board, to take a tiny tryout position, I finally got around today to looking at the financial results and here is what the Dec 2019 quarter told me:

Active accounts were up 36% to 37 million (so so)
Streaming hours up 60% (good)
Average revenue per user (ARPU) up 29% (I guess comparable to net retention rate, so not bad).

Now the finances:
Total Revenue of $411 million was up just 49%.
Total Gross Margin was 39.3%!!! and was the lowest in the last five quarters. (That’s terrible. It means cost of revenue was 60.7% of revenue, without even getting to operating expenses, the cost of running the business).

Platform Revenue was 63% of total revenue, and was up 71%. That part sounds good, but

Platform Gross Margin Percent was 62.5%, and that was also the lowest in five quarters. The progression has been:
72.2%
69.9%
65.4%
62.6%
62.5%
So gross margins have fallen by 10% yoy. That’s terrible too.

Player Revenue (or hardware revenue) is the other 37.5% of total revenue. It was up 22% and has a slightly negative gross margin. That was also the lowest margins have been in five quarters.

Operating expenses grew 68% yoy!!!, and were 44% of revenue. It doesn’t look as if they are moving towards a profit.

Operating income was a LOSS of $17.4 million, down from a (rare) operating profit of $5.5 million a year ago.

For the 2019 year there was an operating loss EVERY quarter, for a total operating loss for the year of $65 million!

The net loss for the year was $60 million, worsening from a loss of $9 million the year before.

They don’t give adjusted figures, so finding out what the real net income was is almost impossible, but if you work your way through you find that they gave out $85 million in stock-based compensation, and when you work your way all the way down, they had operating cash flow for the year of $13 million. However figuring into that there were a myriad of plusses and minusses such as:

Provision for doubtful accounts
Noncash interest expense
Loss from exit of facilities and disposal of property and equipment Impairment of long-lived assets
Amortization of premiums on short-term investments

Changes in operating assets and liabilities:
Accounts receivable
Inventories
Prepaid expenses and other current assets
Operating lease right-of-use assets
Deferred cost of revenue
Other noncurrent assets

Accounts payable
Accrued liabilities
Operating lease liabilities
Other long-term liabilities
Deferred revenue

Then they show an outflow from investing activities of $110 million (mostly purchases of property and equipment and businesses), and an inflow from financing activities of $458 million, most of which seems to be from selling stock:

Proceeds from equity issued under incentive plans, net of repurchases - $28 million.
Proceeds from equity issued under at-the-market program, net of offering costs - $331 million

They seem to be purposely making it almost impossible for anyone to figure out what the actual real adjusted) net income really is, or do they just want you to take it at the figure they gave, of a loss of $60 million.

Can anyone explain to me why I should take money from one of our other companies to invest in this mess, except for all the hope, and the “great” story. Sure, CTV is coming, and they are there, but making money???

Oh, and they pre-announced estimated revenue, etc that they gave on Apr 11 for the March quarter of this year, was for revenue about 2% above guidance at the midpoint, and the rest unchanged and very unexciting.

Total net revenue $307 - $317
Total gross profit $139 - $144
Net income (loss) ($60) - ($55)
Adjusted EBITDA1,2($23) - ($18)

I must be missing something here! What are you seeing that I’m not seeing?

Saul

[Texmex]

ROKU OM and FCF for 2019 was around -6% not bad but not great either. A lot of the cash went to the Dataxu acquisition would be my guess.

I value Roku for its platform rev not player rev. I am happy if player rev ends up at zero GM. I see that as means to get platform rev. Pre covid they were projected to grow platform rev 70-75% or around the same rate as CRWD, DDOG, and ZM at that time. It has consistently stated that platform GMs should trend towards 50-55% but ultimately platform rev should constitute most of the rev. In 2020 it was projected to be about 75%. So, precovid even if one accounted for the lower GM, Roku which was growing its platform rev at about the same rate as some of our fastest companies and had much better valuation. So, that was my buy thesis. After covid we know that advt. rev. will take a hit. So, I don’t expect 70%+ growth in platform rev for this year. But Roku does get a cut of the sub rev as well. So, the expectation is that the drop will not be so bad. It’s P/S based on platform rev is 18.6 which does make it attractive. Much depends though on how long this drop off in advt. rev continues. That seems to be the uncertainty reflected in the share price. We know Q1 will be fine, Q2 will be bad. But if ad rev comes back by Q3 or Q4 then thew stock should do a lot better.

[brittlerock]

Saul,
I’m confident that you aren’t missing anything. With your experience and clear-eyed examination of financial records I’m confident that if anyone is missing anything it’s me and others who have been blinded by the potential rather than focused on the reality.

Roku may well capitalize on the potential that lies before them. IMO, they are already the winner when it comes to content aggregation for streaming. Amazon’s firestick, AppleTV, etc. (there are a few others) are all lagging I’m quite certain. But it’s clear, if Roku really takes off, it won’t be too late to get on board when and if it happens. Until then, it’s a horse race and Roku is simply the favorite. Long shots often win races.

In that I selected Roku as one of the five companies that I chose to re-enter the market, I am now re-assessing that decision and will most likely make an exit soon.

As usual, I’m in awe of your ability to see and clearly state the obvious. Thanks for your analysis and write up.

[12x]

Here are a few things about Roku:

1. they do not break down Platform Revenue, which is essentially all other revenue they generate besides the dongle hardware. And it can be anything from revenue generated from selling their OS to OEMs to revenue for new account signup splits. We can expect the gross margin to fall to and stabilize in the low-mid 50s. This is their target as advertising becomes a bigger portion of platform revenue and it has lower margin.

2. the hardware revenue has always been nothing more than a loss leader to get people onto Roku and generate platform revenue.

3. Opex would have grown 56% for the year if you take out the dataxu acquisition. Most of their increased expenses is due to increased headcount and their focus on growing the platform revenue. They are also expanding internationally which is another expense.

4. Roku is the leading OS in the US and 1/3 of all Smart TVs sold have a Roku OS. Realistically, it is not likely to improve upon that unless they somehow manage to convince LG or Samsung, who have their own OS, adapt the Roku OS. However international expansion is a significant opportunity and if they can replicate their success here to other parts of the world that would be a great return. They are just now entering international markets and I am awaiting feedback from their initial results. However they seem to be taking a soft launch approach in UK, their first market, by only offering certain TV models via HiSense exclusively through one retailer. So it may be a while before we see results.

[spudlyone]

Thanks for all your work! advertising revenue is the big draw. Everyone is talking about the lower ad spend, yet Facebook just came out with good ad revenue, and TTD went up 30 bucks a share that day. Might or might not bode well for Roku. Same for Rubi who reports 5/6.

[12x]

I’m confident that you aren’t missing anything. With your experience and clear-eyed examination of financial records I’m confident that if anyone is missing anything it’s me and others who have been blinded by the potential rather than focused on the reality.

That’s a pretty broad brush to paint any Roku investor as being unaware of what is going on. When I bought Roku a year ago, instead of TTD, Platform Revenues were already a substantially smaller portion of the revenue and I kept hearing over and over “I’m not going to invest in some hardware dangle manufacturer with low margins.” Now a year later, ROKU stock is up 90% while TTD stock is up 26%, and Platform revenues are continuing their trend upward. Something I fully expect to continue. Especially given the huge increase in market share that TV manufacturers that use the Roku OS are experiencing, and their push into international markets. I didn’t feel I was missing anything then and I don’t feel that way now.

The only thing that’s changed is Roku is even less confusing due to it’s higher percent of revenue being Platform sales, so the mixed revenue structure of Roku is becoming more clearly defined compared to when I first started following Roku or for others who have been holding/following even longer. I guess you can say I’m not going to have my conviction in my ROKU position so easily shaken by one post. If I’m missing something, I guess I will find out the hard way.

[draj]

dongle hardware

Please define dongle.Thanx.

[1poorguy]

A “dongle” is a term used to refer to a device that plugs in that adds some functionality.

I first saw it as part of an authentication system. You had to have a “dongle” plugged into a USB port that told the software you were an authorized (i.e. paid) user.

But it can be generalized. Our Chromecast plugs into an HDMI port. Our ROKU does also. Both are regarded as “dongles”.

1poorguy

[SaulR80683]

I guess you can say I’m not going to have my conviction in my ROKU position so easily shaken by one post.

Hi 12x,
I wasn’t trying to shake anyone’s conviction. It was my own that was shaken and I was asking others what I was missing, because a company with 39% gross margins (and falling) and growing at 49% per year, with lots of losses, which were growing, and a confusing earnings report, didn’t seem like our kind of company. It may do great, and I hope so, because I wish that everyone on the board does well.
Saul

[PaulWBryant]

Saul, I’ll take your ROKU negatives one by one. If I miss any feel free to respond.

So gross margins have fallen by 10% yoy. That’s terrible too.

We don’t want to see it falling long term, but over 60% is still better than TWLO, and immeasuarbly better than non-software (or advertising) revenue. It’s incredible! We want to see it stabilize or reverse, but as TexMex points out it is expected to.

Player Revenue (or hardware revenue) is the other 37.5% of total revenue. It was up 22% and has a slightly negative gross margin. That was also the lowest margins have been in five quarters.

This can be ignored. It’s all about the Platform Revenue.*

Operating expenses grew 68% yoy!!!, and were 44% of revenue. It doesn’t look as if they are moving towards a profit.

As 12x points out, the dataxu acquisition factored in here.

Operating income was a LOSS of $17.4 million, down from a (rare) operating profit of $5.5 million a year ago.

For the 2019 year there was an operating loss EVERY quarter, for a total operating loss for the year of $65 million!

The net loss for the year was $60 million, worsening from a loss of $9 million the year before.

Okta’s GAAP loss for the year was $186 million, off much less revenue. I wouldn’t worry.

Bear

**Because the relevant story here is platform revenue, there’s a lot of noise in the numbers with this company that we don’t have to worry about with say, Datadog. But there in lies the opportunity, in my opinion. The market has (and I too have) had a lot of trouble valuing ROKU. But I see it heading to $200/share+ in short order.

[SaulR80683]

Thanks Bear, that was very helpful.
Saul

[Rubenslash]

It’s not too hard to get non-gaap figures btw, you can take operating income as per the P&L statement and then add back the stock based compensation which is disclosed separately. This shows improving operating income margins except for the last two quarters (not sure why, might have to do with the costs related to the acquisition as mentioned here + expanding into Brazil). See chart: https://imgur.com/a/NA4Wjuj

Anyway I am not too focused on profitability yet, otherwise you also miss opportunities such as Netflix and Amazon. This is a story stock and in my opinion, it’s probably one of the best stories on Wall Street right now.

[stocknovice]

The net loss for the year was $60 million, worsening from a loss of $9 million the year before.

I’m with Bear on this one. I’m not too worried about the GAAP numbers, and thanks to Rubenslash for the non-GAAP breakdown. I’ve tended to look at Adj EBITDA instead, which Roku does provide.

I actually think this is one of the reasons they’ve taken a hit since last quarter. Roku had just posted $35.8M in EBITDA on the year but guided for a loss in Q1 and -$10M to $10M for the year. It’s worth noting that breakeven was the same guide they gave last year before the positive finish. Here’s the history (FY20 are top end guides):

Adj EBITDA						% Revenues					
	Q1	Q2	Q3	Q4	YR			Q1	Q2	Q3	Q4	YR
2017	-$4.41	-$9.63	-$3.67	$14.38	-$3.33		2017					
2018	-$0.82	$7.13	$1.97	$24.49	$32.77		2018	-0.6%	4.5%	1.1%	8.9%	4.4%
2019	$9.97	$11.11	-$0.44	$15.14	$35.79		2019	4.8%	4.4%	-0.2%	3.7%	3.2%
2020	-$18.00				$10.00		2020	-5.7%	#DIV/0!	#DIV/0!	#DIV/0!	0.6%

I’ve written a lot about ROKU but don’t really have much to stand on given the stock’s underperformance YTD. To me their entire story revolves around the following metrics:

• Platform Revs
• Platform Revs as a % of Total
• Platform Gross Margins
• Active Accounts
• Streaming Hours
• Average Revenue Per User
• Adjusted EBITDA

If those numbers make sense and are heading in the right direction, I believe Roku can be a big winner. We already know from their preannouncement that total revenues for this quarter will almost certainly accelerate sequentially and most likely YoY as well. That’s pretty impressive at a run rate > $1.25B. Any of that falling to the bottom line should also ease some concern over the stagnant EBITDA.

I can’t argue with Saul’s breakdown and totally understand the bear case. I’m just choosing at present to align with the Bear case instead.

Ask me again on May 7.

[12x]

The main issue to me with Roku is their reliance on TV manufacturers. People talk about Apple TV, Amazon Firestick, etc. These are all competition. But to me, longer term, the real battle will be with what operating system is already embedded in the Smart TV when it leaves the store. Roku dongles have already been seeing a big increase in demand during Coronavirus lockdown. That’s because people still have an old TV without a good operating system. I have a Roku dongle myself because my 5 year old Samsung does not have a good operating system. It is limited to only a few of the top streaming services that were around when the TV was made. With the increase in new streaming services, like Peacock and Disney+, I would either need to buy a new TV with an improved OS, or a $35 Roku fob (or Amazon Firestick). So, these fob device sales can expect to fall over time as a larger and larger portion of TVs sold are Smart TVs, and the Smart TV has an improved, up to date OS that will have all the channels and be able to add new ones as time goes on. Samsung and LG, two very large TV makers, have their own OS. HiSense and TCL are the main TV makers that use Roku. And this brings me to the risk with Roku. What I worry about with Roku is TCL getting rid of Roku and deciding they want to move up the value chain and have their own home-brewed OS. You can see that TCL went from 15% of all smart TVs sold in 2020 to something like 25% last year, based on volume. I can only conclude that Roku is riding TCL’s coattails in the US, and that it is a mutually beneficial partnership. TCL is not the only manufacturer that has seen their market share increase. Virtually all TV makers that use Roku as their OS have seen their market share increase.

The goal, the big opportunity is that Roku will duplicate it’s success here to overseas as they work on an international effort. And TCL, and others (some that don’t even sell here but have a very big presence in Asia for example) will adapt the Roku OS as it becomes available in other regions of the world.

The risk is they don’t. The other risk is TV makers pull away from the Roku OS. This is the reason I would not want to have Roku some crazy big portion of my portfolio. While the opportunities are great, the risks are also great. Roku seems to have reduced a certain other risk, and that is, as their user numbers continue to grow, streaming services will absolutely want to make sure they are available on the Roku OS. And this becomes a great source of power to Roku. The problem, in turn, is that Roku is dependent upon TV makers for that power.

Roku has been very successful in USA. And every time some company made some announcement about a competing product that dropped Roku’s share price, it was a buying opportunity. Comcast late last year for example put out a “free fob” where you can use it as an alternative to a Roku OS and this literally made the stock crash somewhere around 30-50%. The problem is that free fob is only available if you rent Comcast’s modem (as opposed to just buy your own) and it was a very poor alternative to Roku because not that many channels were available. Do cable TV services really want to obsolete themselves and make people realize they can just stream TV instead of paying $100 a month for cable TV and watch shows on the TV’s scheduling instead of the customer’s?

I really need to keep an eye on what TCL is doing to try and get an idea they may displace Roku.

https://www.prnewswire.com/news-releases/tcl-electronics-ove…

Notably:

The Company will continue to optimize its channel structure in the PRC market by launching advanced digital marketing tools such as T Sales and TCL Home implementing the activity of “Explore Markets in Counties, Develop 10 Thousands of New Stores” in April. Since the pandemic situation has taken a turn for the better in China, sales volume in the second quarter is anticipated to resume growth. Moreover, the Company has launched the TCL•XESS Smart Screen, the first rotatable screen capable of auto rotation to vertical mode in the TV industry, which is the first to achieve seamless switch between mobile phone and large screen, with deploy of pop-up AI camera and capability of interaction among multiple screens. The TCL•XESS Smart Screen has received high recognition from the consumers since the first day it launched.

This is an android-based tablet. Available here in USA. It gets bad ratings on amazon.

The user base of Internet business continued to expand. The accumulative number of newly-activated users operated by Huan reached 2.92 million in the first quarter of 2020. Meanwhile, the accumulative number of global users exceeded 45 million, reaching 45.25 million, which up by 30.0% year-on-year. And the average daily number of global active users rapidly surged to 23.41 million, with year-on-year increase of 36.7% (Source: Huan Technology Co., Ltd. “Huan”). As of March 2020, the existing subscribers of Falcon Network Technology has significantly increased by 148.8% year-on-year, and the revenue from the online membership business of Falcon Network Technology in the first quarter of 2020 rapidly increased by 141.1%, showing the further improvement of the profitability.

I don’t know what this is, and it seems difficult to find out if this is some sort of alternative to Roku as it’s only available in China it seems.

TCL Electronics focuses on smart display industry and servicing global users, as its market share has been continuously increased in the past three years, with the total shipment in 2019 ranked top 2 in global, indicating its growth outperformed the industry. As the global layout of display panel will undergo a great change, China’s panel industry will rise further, and the enterprises from Korea will gradually shrink out of the LCD panel industry. As a Chinese leading enterprise in smart display industry, TCL Electronics will further seize the development opportunities. Due to the uncertainties of the pandemic in overseas recently, the Company will continue to invest in R&D and product innovation, and strive to maintain annual sales growth. In addition, the Company will focus on developing global Internet business, and vigorously propel the “AI x IoT” strategy, in order to become a global leading intelligent technology company and create greater value for shareholders.

When they talk about panel displays, I see that not as a threat to Roku but actual physical picture quality from the panel screen. However I am not sure what the AI x IoT strategy is.

Roku has said they do not pay TV makers to install their OS. They said they have heard “rumors” of other OS companies doing so but never anything confirmed. If they do not get enough power over the TV makers, I see that as a risk. However, on the other hand… with what Roku has been spending just to get where they are now, maybe it wouldn’t be worth it for these other TV makers to try and replicate what Roku has done.

Late last year they had this to say:

The Company deepened its Internet TV business partnership with Roku (ROKU) in North America and Google (GOOGL) in Europe and South America in the first half of the year to jointly upgrade user experience of TCL TVs in overseas markets. With stronger profitability of its overseas Internet business, TCL Electronics has become the first Chinese company of the industry to gain large-scale and sustainable revenue generated from overseas Internet business.

They went on to say this:

In the future, the Company will further penetrate into key overseas markets and deepen strategic cooperation with Roku and Google; proactively expand into emerging markets which have huge potential such as India and South America; optimize its product mix and channel structure in China; build an even stronger brand awareness in the global market and improve brand influence, continuously enhance global manufacturing layout and continue to increase global market share. At the same time, the Company will push forward its Internet business and the strategy of “AI x IoT” and strive to realize the interconnection of hardware + software + all devices with various loT scenarios, and provide users with smart and healthy living products and services with the aim to become a global leading smart technology company with recurring and sustainable Internet business revenue, and create greater value for shareholders.

I looked up the AI X IoT, and it is an android based OS.

https://techlustt.com/2020/01/tcl-launches-its-latest-ai-x-i…

So at no point during this review did I see anything where TCL is working on it’s own OS. But the war between Roku and Android is far from over. Roku has a strong presence in US, now starting to push for overseas where Android has a much bigger dominance.

Anthony Wood stated that any PC based OS did not succeed for the cell phone. Only when Google made Android specifically for the phone, did an OS take off. Android is built for the phone, so they may fail in the TV market for that same reason that Microsoft and others failed in the phone market when trying to apply their PC OS to it.

Obviously the sooner they get going internationally, the better. So companies aren’t having to start from scratch when they have devoted so much to Android.

[Darthtaco]

Sure I get some of Saul’s arguments.

Perhaps other companies are better places.

Here is the gist of Gross Margins issue. It is mostly Roku channel success and how their revenue gets accounted. They’ve described this I think in Q2 and Q3 quarters earnings calls. I won’t paste the statements again but try to briefly describe what they said.

Roku Channel drives subscriptions to various Subscription Video on Demond (SVOD). HBO, Showtime, etc. A customer can download HBO app(channel as they are called in Roku platform) and sign up for HBO or bring their own HBO subscription and HBO away. If they sign up in Roku, Roku gets a cut, if they sign up away and bring in subscription Roku gets nada. If you are new to Roku and streaming or otherwise so inclined and start out in Roku channel you can just one click add HBO or whatever. It’s super easy to sign up that way. Billing, sign in, everything is just through your Roku account. Add all the premium content you want.

Ok so now why Roku Channel matters. It’s “net” revenue vs “gross” revenue. In example, HBO “app” on regular Roku platform is treated as “net”. Roku accounts the revenue in this transaction as “net”. They only account for their cut of the deal. So say it’s it’s 10% cut of a $5/mo subscription. Roku accounts $.50 of very high GM revenue. Probably 90%+.

Same $5/mo subscription in Roku channel. Accounted as “gross” where Roku is like the cable company, a reseller. Roku accounts the $5 as revenue then accounts the $4.50 to HBO or whomever as COGs.

These are just simple made up numbers to illustrate.

So why is Roku doing this then? To drive Gross profit. In both instances they gain $.50 in Gross profit per month per subscription. The theory is that they ultimately drive many more subscriptions through the Roku channel than without.

So the singular most important number then is gross profit growth. Here’s the hard truth. Gross Profit growth does not look good.

So last couple of quarters of platform gross profit growth, oldest to newest. With platform revenue growth in parentheses for comparison.

76%(79%), 74%(84%), 59%(79%), 48%(71%)

So we can see that Platform gross profit growth is falling fast while platform revenue growth is staying very strong. I think this is due to the dichotomy and revenue mix is going much stronger to Roku channel. Among other things mentioned. Then also a similar issue with Roku channel and Ad video. With a “net” outside of Roku channel and “gross” inside.

For another time.

Darth

[ZoroSGInvesting]

Roku Channel’s massive growth over 2018/2019 does contribute the majority of the GM drop (and Gross profit growth as well) as Darth mentioned - in Roku channel the GM is much lower than outside of it. Then the question is: Roku of course knows about it but they still aggressively invest in Roku channel and bet on it, why?

He is what we get from Q4 2019 shareholder letter:
The Roku Channel is a key driver of engagement and monetization for ourselves and our content partners. It includes a personalized experience with free, ad-supported, live and premium subscription content. (I think it may be the biggest beneficiary from dataxu acquisition)

In 2019, The Roku Channel reached active accounts with an estimated 56 million viewers. Parks Associates reports that The Roku Channel is one of the top three ad-based OTT services among U.S. broadband households (Q3 2019). We drove growth in streaming hours of The Roku Channel at an even faster rate than our overall streaming hours growth rate in 2019 by continually expanding the quality and scope of the ad-supported offering, launching new subscription channels and investing in our product and capabilities. We have added more than 40 Premium Subscription channels, launched the Kids & Family experience, and now offer more than 55 live linear channels. We also continued to expand access to studio and network movie and TV content.

As a Roku investor, I tend to believe in this strategy, especially after dataxu integration. From the platform GM perspective, Q4 seems to finally stabilized at 62.5% (flat from Q3) but it shall not be a problem if it drops to high 50s as long as it maintains high platform revenue growth - similar as SHOP.

[rtichy]

Over time, I personally expect LG to need a new OS. They bought their OS from HPQ (webOS came to HPQ from the Palm acquisition). So it’s already “Old”, and I would guess it is either under-developed or over modded at this point. I somewhat doubt LG has the skills to rewrite it from the ground up.

So, someday relatively soon, I expect them to go looking for another more modern OS for their displays.

And, I expect LG will not go shopping in China for an OS.

-Another Rob

(That doesn’t fully answer your concerns about Roku as embedded OS in the future, but gives a little background to incorporate in your thinking.)

[1poorguy]

I may not be typical of a Roku user. I am interested in the stock, and find this discussion very useful.

I came to Roku because the “smart TV” continually dropped the connection. I had “cut the cable”, and was relying on my smart TV. I had the subscriptions for what I wanted. But I was finding I had to unplug the TV, and then plug it back in. Essentially, reboot it. I was advised that Roku was much more stable, so I bought one.

The point is that I brought my subscriptions with me. So, if I understand what people in this thread are writing, Roku doesn’t make any money from me as a user. I just bought the dongle, and that’s all they get. It makes sense that they would want to have users do everything through them if they get a cut. I had assumed they would get a small cut from any subscriber that used Roku to access the content. Evidently not. That is concerning if many/most users are like me and had their subscriptions before they had the Roku device.

The next logical step might be to try to seize the OS market for smart TVs. Charge per TV, like Microsoft did with PCs, and that could be a profit engine. Make it a marketing feature (e.g. “powered by Roku”). Then it wouldn’t matter as much where people got their subscriptions.

1poorguy

[HorsePlayAndrew]

I would be very cautious on the international expansion bull case. I live in London and the TV market here is predominantly Samsung/LG.

My friends and I all have Samsung and the OS is very good, allows you to add new streaming apps easily, so I see very low adoption of Roku in the UK and Europe.

I just don’t see any need for it when any modern TV has a decent OS already, and most of the market here have their subscriptions into netflix et al already.

[12x]

I would be very cautious on the international expansion bull case. I live in London and the TV market here is predominantly Samsung/LG.

My friends and I all have Samsung and the OS is very good, allows you to add new streaming apps easily, so I see very low adoption of Roku in the UK and Europe.

I just don’t see any need for it when any modern TV has a decent OS already, and most of the market here have their subscriptions into netflix et al already.

Jeremy,

I would never expect a huge line and a sudden rush to get a Roku TV as if it were a new Apple iPhone launch. Nor would I expect people to dump their perfectly working TV to rush out and buy a new Roku TV. This would be more of something that would seep up in market share, and only as TVs need replacing, would Roku get the opportunity for a sale. Roku does not have a “cult following” like an Apple or Tesla. It excels because of the total package; a good TV at a great price. HiSense Roku models were only released 11/29/2019 in UK, and were exclusively sold through Argos. So in reality, having an exclusive dealer, this is more of a “soft launch” to me. As of an article I found on 1/20/2020, Roku was still exclusive to Argos.

Here is a typical review of a HiSense Roku TV.

In the UK, the 50-inch Roku TV costs just £299 at launch, which makes this telly something of a game-changer. Its picture and especially sound quality are both better than could reasonably have been expected for so little money. It’s the Roku smarts, however, that really make this set stand out from its peers.

The quantity of the apps Roku provides, together with its interface’s no-nonsense simplicity and stability, rewrites the budget TV rulebook. In fact, the Roku engine works so well that it’s easy to imagine Hisense being only the first of many brands to tie the Roku knot, as is the case in the USA and wider markets.

Roku will compete on price. There won’t be a comparable TV set on the market for the price you can get for a TV with Roku installed. Here in USA, a Roku TV may be about $100 less for a comparable non-Roku TV. And that’s what will allow manufacturers to continue to eat into the market share of other manufacturers. And, if what we have seen in USA carries over to UK, Samsung WILL see their market share fall. It’s not an overnight thing though. Last year, TCL overtook Samsung in USA based on number of units sold, and that was largely at Samsung’s expense (Samsung still has the top spot based on total dollars due to a higher price point, but what matters here when we’re talking OS is number of units sold).