I’m clearly biased as a ROKU holder, but welcome the continuation of this thread.
They are too reliant on TV makers to help them grow their customer base. The truth is, your average consumers don’t care whether their TV has the ROKU OS on it or not.
This seems to be a common argument against Roku, but I view the average consumer’s indifference as part of Roku’s advantage. The company has been able to increase its OS share from 1-in-5 to 1-in-4 to currently 1-in-3 of ALL new smart TV’s sold in the US. That means those indifferent consumers now have a 33% chance of getting Roku’s platform as their easiest streaming option regardless of their purchasing decision. The moat isn’t consumer preference. The moat is the pre-existing relationships they have with TV manufacturers. Is that really so easy to displace? If so, why?
As the streaming wars heat up, all that AMZN (FireTV), GOOG (Chromecast), AAPL (Apple TV), or any of the other companies getting into the streaming business have to do is throw a little cash at the TV makers to get them to bundle their own systems instead of ROKU’s. It’s beyond me why this hasn’t already been done, but I expect deals to be cut with the TV makers to displace ROKU or at least offer TV models with other streaming services.
I can’t entirely disagree, but wonder whether this view is too simplistic. If I’m a TV manufacturer who doesn’t have my own OS, do I want to lock in with a potential content provider or go with a neutral platform instead? I already know I’m putting myself at a competitive disadvantage if I offer a TV without streaming capability, so I have to choose something or risk becoming obsolete. If I’m trying to maximize my potential customer base, wouldn’t I prefer Roku? Even if I take some money up front, using any of the companies above limits me to customers using their service on the back end. That might ultimately cost me market share, and I’m not sure I want to do that. Roku’s OS gives me access to pretty much any customer regardless of who they ultimately choose for their content. I view that flexibility as a large advantage for Roku. What am I missing with that line of thought?
I say this not sarcastically but as an honest observation: maybe the reason why this hasn’t already been done is because it’s easier in theory than in practice? Plenty of companies are in a position to “throw a little cash at the TV makers”. Yet that clearly hasn’t happened. Why not? And just how much should we fear it going forward?
Companies like ROKU that are so reliant on 3rd parties (TV makers in this case) for distribution of their product/services get easily squished.
This is a two-way street. Roku indeed relies on 3rd parties with regard to both TV makers and content providers. Likewise, those 3rd parties have to work with Roku if they’d like access to Roku’s leading OS, 30M+ users and/or 9.4B+ streaming hours. Granted, nothing prohibits any of those 3rd parties from going it alone. However, they’d need to forfeit everything found in the current streaming ecosystem. They would need to manufacture their own TV, have their own OS, produce their own content, provide their own platform updates, find their own customers and handle their own billing. Who’s capable of doing that other than maybe AAPL or DIS? Do they really want to make that sort of resource commitment given all the other things they have going on?
I’m not saying there isn’t competition. I just see the market as more intertwined than some of the statements above imply. If manufacturing, content and distribution agreements didn’t make financial sense, then why are all these companies choosing to enter them? Shouldn’t every company simply go solo? There’s a reason all the firms you list above have chosen to find a way to work with Roku thus far. And I’d have to think this will continue to be the case until Roku sees a marked slowdown in customers, hours, platform revenues and/or platform revenues as a percentage of total revenues. At least that’s what I’ll be watching going forward.
I just can’t get behind ROKU as an investment.
And I’m not trying to make you get behind it. I’m just trying to clarify the bear thesis. I might be totally wrong, and believe me it won’t be the first time. Heck, I own the stock without even using the product! Maybe that’s created holes in my logic. If so, poke away. I’d welcome as many flaws as you can find. It might either make or save me money.