Roku’s premium channels mean ‘pay-TV 3.0’ here
Streaming device maker Roku is looking to expand its reach in homes and on the go – a strategy also aimed at generating revenue.
Later this month, the company will let users subscribe to premium channels such as Showtime, Starz and EPIX – no HBO as of yet – within their Roku account. The Roku Channel will evolve into a destination not only for its free ad-supported movie and TV episodes, but also premium subscription content.
Also in late January, Roku users will, for the first time, be able to use the streaming company’s mobile app to watch video on the go from the Roku Channel and their paid channel subscriptions.
Roku may find some traction with this strategy despite Amazon and Apple already being active in brokering premium streaming channel subscriptions, and getting a cut of the proceeds. That’s because consumers prefer to have multiple channels aggregated à la onestop shopping, says Michael Greeson, president of research firm The Diffusion Group.
“This is pay-TV 3.0, if you will,” he said, noting that payTV 2.0 marked the arrival of live multichannel streaming services such as Sling TV and DirecTV Now. “But in this case you can choose and pay for only the channels you want, and easily cancel or add a channel at any time, all within the same branded interface.”
Consumer sentiment is what drove Roku to such a strategy. “The vast majority of people want to watch this content on the big screen in the home, but some do want to have mobile access and some want to have web access, as well,” said Rob Holmes, Roku’s vice president of programming. “We feel this is a really great solution for them. They might start watching ‘Berlin Station’ on EPIX on the TV at night, and maybe they don’t get all the way through the episode. They can pick it up on their phone in the morning on the way into work and finish.”
Roku has been building out the Roku Channel since launching it in October 2017 just after the company went public. The free channel provides users of Roku’s streaming boxes and sticks with more than 10,000 movies and TV episodes, shown with about half the advertisements on typical ad-supported TV broadcasts. It has since added news, entertainment and sports programming to the channel, too.
The strategy apparently has helped boost Roku’s viewership. The streaming company said it had more than 27 million active accounts in the fourth quarter of 2018, up about
40 percent from a year ago, according to data Roku released Monday at the Consumer Electronics Show in Las Vegas.
Hours streamed during the October-December period rose
68 percent to about 7.3 billion hours, driving full year streaming up 61 percent to about 24 billion hours, Roku says.
Roku remains the most popular video streaming box, with about 63 percent of device users choosing it, according to The Diffusion Group, which surveyed about 2,000 U.S. adult broadband users in the fourth quarter of 2017 and 2018.
Amazon Fire TV boxes are used in about 33 percent of device users’ homes, while Apple TV has just below 30 percent (some homes have more than one device).
And Roku is increasing its footprint in the video streaming stick competition, too. While Amazon dominates as the choice of 58 percent of device users who have a streaming stick, Roku has increased its reach to 40 percent, up from 34 percent a year ago, the research firm says. Chromecast has 26 percent.
In October, Roku began shipping new wireless speakers designed to work with Roku TVs.
More than four out of 10 new Roku users (43 percent) said the Roku Channel influenced or strongly influenced their decision to buy a device, says Holmes, citing a recent internal survey. “That was exciting for us to see that even for folks who don’t own a Roku yet, they are aware of the Roku Channel and they think it brings them value and it’s influencing how they are thinking about entering the Roku ecosystem,” he said.
Enhancing the Roku Channel to give users one-click signup for premium video services – as well as one monthly bill and one destination (my.roku.com) to manage subscriptions – will simplify things, Holmes says. The Roku Channel also displays what programming is available on a premium service so users can view and search the content before starting a free trial of the service, he says.
“We really think this opportunity to bring all these subscription services together into one (user interface) is going to be much easier for our users,” Holmes said.
Roku shares have declined about 6 percent over the past 12 months, during a time when the Nasdaq composite fell about 5 percent.
Roku’s strategy follows that of others such as Amazon with its channels program that lets you subscribe to HBO, Showtime and other channels within Amazon Prime Video. The monthly fee is included in your Amazon bill. “It’s working for Amazon Prime as well, so it seems like low-hanging fruit,” said Michael Pachter, an analyst with Wedbush Securities.
Having the subscription services on the Roku Channel home screen “makes it easier for the services to attract new customers and to promote during ‘free view’ weekends,” Pachter said. “My guess is that Roku gets the first month of subscription fees for converting customers, and that can be a sizable revenue boost.”
Initially, Roku will have 25 subscription services available, including Baeble Music, CollegeHumor’s Dropout, CuriosityStream, The Great Courses Signature Collection and Smithsonian Channel Plus.