How does Roku really make money?

How does Roku really make money?

Brian Withers: It does. Toby Bordelon: You got the device, they made some money that way. They have a new channel called the Roku Channel. I don’t know if you’ve watched that at all? If you do, there’s advertising revenue on there. That’s their own homegrown stuff, their own content that they’re making money with the advertising through that channel. If you know your remote’s got a little Netflix button on it probably, maybe a Hulu button. Toby Bordelon: Those companies pay for that. It’s not like someone at Roku is deciding, hey, let’s just put this on there for kicks. They pay Roku for placement of their branded button on that remote so they make money that way. Other ways which may not apply to you specifically, they license their OS to TV manufacturers, so it’s built into TVs. They do billing services. If someone were actually to subscribe on Roku, they get a cut of that revenue for the service. That you’re not buying subscriptions through Roku, maybe you’re not their most profitable customer, but they get a little bit of cash from you, and it all adds up over time if they can do that with 50 million people now.

Toby Bordelon: The answer is yes, they do in a couple of ways. First, you bought the device presumably or someone did. Brian Withers: Yeah, Toby. I’ve owned a Roku and I have used Roku to watch Netflix since 2010. Recently we’ve added a number of other streaming apps; Spectrum, HBO Max, Amazon Prime, and Disney+ when The Mandalorian has a new season. But I’ve never paid any subscription fees to Roku. Does Roku make money off our family?

Brian Withers: Yes, I did.  Gross profit, up 132 percent to 327 million. Good stuff there. 2.4 million new active accounts there at 53.6 million active accounts now, and the big one here, which you’ll always want to see from a subscription company like this or at a user-based company, average revenue per user up 32 percent, so that’s really nice. All-in-all, I like what I’m seeing here. They’re not on the same level as say, Disney with its Disney+ or even Netflix, but in the streaming space they are significant and doing well.

Source www.fool.com

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
Brian Withers: Yeah. Very cool, very cool. Thanks for explaining that, Toby, that’s helpful.

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