Roku Acts Like Streaming TV’s Bouncer. Can That Last?

There are various entry points for consumers to enter the streaming TV environment, but none appears more closely guarded than Roku.

As the streaming device manufacturer/programmer has attempted to grow its ad business in recent years, it’s also upped its demands of content owners that want apps to appear on Roku. Coupled with the explosion of new services in 2020 and an immediate need for subscribers, Roku’s basically streaming TV’s bouncer right now.

As such, they appear content to torment the entertainment industry, which the Wall Street Journal’s Patience Haggin pointed out in an extensive feature this week. While the likes of Apple, VIZIO, Samsung and others are trying to approach their “gatekeeper” role in a more collaborative fashion (at least comparatively), Roku wants to dominate the market by bending media companies to their whims. Looking at the fight put up getting a deal done with HBO Max, it seems the approach is working. Roku, which has about 35% of the U.S. connected TV market right now per an August survey, keeps getting more ad consolations in exchange for pick-up. That helps grow its fledgling advertising business -- which make up an increasing piece of the revenue pie for the company and will be a big part of future growth.

Said growth and the ad focus puts them more in competition with the likes of TV manufacturers than streaming-only hardware like Chromecast, Apple TV+ and Amazon Fire TV sticks -- with the latter two also prioritizing billions toward original programming. VIZIO and Samsung would seem to have the long-term advantage there as the price of connected TVs decrease and you don't have to buy any additional devices to access streaming content through TVs the same way you have to with Roku/Amazon/Google/Apple hardware.

So while Roku appears to be the bouncer now, is that likely to change over time? The more power the company consolidates in the short-term streaming environment, the better-positioned they are to pivot (as they have in recent years with advertising) when TVs wind up controlling their original intended market. Roku doesn't have to lord over streaming access the way it does now in order to be relevant in the future. It just sets up the next play, where they keep finding ways to positively impact the consumer experience.

One way forward there could be as a streaming MVPD or bundler as the number of streaming services continue to climb and the cost of getting these services distributed keeps increasing as well. The dynamic ultimately imparts the cost to consumers (and we're already seeing a bit of that now). Even with the volume and quality of the programming increasing in many cases too, the main benefit of streaming has shifted from price -- where it's arguably at parity with linear TV once you start paying for a couple premium services -- to variety.

Audiences will pay for choice… to an extent. At what point does the pendulum swing back the other way, though? With FASTs also available, there’s a limit to how much consumers are willing to shell out for. We’ve probably reached it already. Apparently the average viewer uses seven streaming services (per NPD) and we’re going to have nine “flixes” by January.

Right now, more streaming services available likely fuels more time streaming by consumers. And that enhances the ad business of Roku and many others. The glut of options probably plays into that streaming bundler/MVPD idea sooner rather than later, though. With consumers looking for relief from an endless collection of bills from different services, there's a market for someone to help make that experience easier (and maybe cheaper too).

Disney's bundle is a start, but it's also just their services. A service like Paket is a greater step in this direction, since it should bridge the gap between parent companies (and similarly, offer a discount in doing so). Roku could enter that market with the advantage of existing market share. The question is when would they make this move and would they pivot proactively, or reactively in response to a rise in TVs themselves being the entry point to streaming environments. If they choose the former, they could potentially stay streaming's bouncer for some time.