Most of the content on Roku's channel is licensed from other media companies and studios — and it's not necessarily their best stuff. The 40, free movies and TV shows are largely back-end library content that media companies have deemed unimportant for own streaming endeavors. When Roku can get its hands on more popular content, it tends to be limited — for instance, it only has one season of "The Bachelorette" Season 13, starring Rachel Lindsay.
In addition to licensed content, Roku has begun dabbling in original programming. Earlier this year, Roku bought more than 75 shows that Quibi created for its short-lived service. It also acquired "This Old House," which is still making new episodes in its 42nd season. Roku has programming for kids and adults, building offerings for anyone in the family. There's some evidence the original programming is finding an audience. Since adding the Quibi library last month, according to Roku's own data, more Roku users have seen that programming in two weeks than Quibi users in its six-month lifetime.
The strategy at this point looks a lot look like — surprise — Netflix. In Netflix's early days, it was happy to license whatever content media companies would give it. Wood declined to comment on the exact total, but did admit the budget will grow next year and in years to come. Wood also said The Roku Channel creates a virtuous cycle.
Roku sells advertising against every ad-supported application on its platform. With its own channel, Roku can offer advertisers another way to market brands. That's more money, which can be used for more content, making the channel a bigger draw for consumers — and more appealing to advertisers. There's real money to be made in free ad-supported video. For the time being, Wood is talking like a CEO who wants to stay under the radar. Wood emphasized that Roku was a distribution platform first and a content company second.
But if content producers don't watch out, Roku may "eat their lunch" -- just as Netflix did, predicted Nathanson. I'd argue companies giving Roku content are digging their own grave. Hastings told CNBC he isn't worried about Roku as a competitor because its goals as an advertising-supported service will be different than Netflix, which is subscription based and has no commercials.
Still, Roku may be able to increase the quality of licensed content over time. Direct-to-consumer streaming apps need global distribution, and Roku has a roadmap to enter countries around the world. Europe is its next likely expansion opportunity, where Google's Android TV is dominant, Nathanson said.
As Roku signs new carriage agreements, it could start demanding that each company give it better content for the Roku Channel. Roku asked for quality titles in its negotiations with WarnerMedia and NBCUniversal, according to people familiar with the matter, but it was rebuffed.
It settled on paying for a few older, relatively unpopular series, such as NBCUniversal's "Coach" — for now. In recent years, Roku has become more aggressive with its carriage agreement demands, including asking for more advertising inventory, higher app store fees, and better content for The Roku Channel.
In April, Roku dropped the YouTube TV app from its platform for new customers in a dispute over manipulating search results and hardware requirements. The main YouTube app remains for everyone, but that deal is up later this year — and could test Roku's leverage. They don't want to compete too hard against all of their content partners.
Then again, if media companies don't work with Roku, where can they turn for distribution? Apple, Google and Amazon are still bigger long-term threats, rich with data and cash, with the power to outspend legacy media for content if they desire. Roku has used its "we're just the little guy" approach to its benefit throughout its existence. They promote our content. They're good partners. Skip Navigation. All Rights Reserved Reserved. STARZ subscription required.
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