Box on demand
Roku is hitting rewind, returning to its roots as a hardware innovator after announcing a “Pro” lineup of TVs, taking the company firmly into competition with other high-end TV manufacturers, with price tags for the new range that could reach close to $1,500.
Entering into the premium market with its own TV — after years of appealing to the masses — is a continuation of Roku’s strategy to get its platform software into as many homes as possible. For a long time, that meant partnering with manufacturers to have Roku software pre-installed.
Left to its own devices
Having started as an internal project at Netflix, Roku spun-out into its own company in 2008, launching its first set-top box and becoming a crucial enabler of the streaming revolution that let millions of viewers watch whatever they wanted, whenever they wanted. Having sold 10 million devices in its initial 6 years, the Roku boxes became a springboard for a much larger, much more profitable, platform business.
That platform segment, which includes advertising and content distribution, has undergone a remarkable evolution. In 2017, the revenue split between devices and platform was nearly a balanced 50/50. Fast forward to today, and the platform commands an overwhelming 85% of the total revenue.
Indeed, even if its successful in selling TVs for a thousand bucks (or more), Roku probably won’t make that much money from them: the company has sold its devices for less than cost, reporting a negative gross profit margin on its device sales in 4 of the last 5 quarters. Even so, every TV sold is another customer on its all-important platform.
