The Roku business model is mainly based on product sales and service subscriptions. It is definitely worthy of aspiration, considering the company’s success so far since its incorporation. Roku has dominated the streaming industry in developed countries like the U.S., Canada, Mexico, and others. Worldwide, Roku has about 70 million users, most of whom use their Roku devices actively. The company recently began manufacturing smart home devices like smart TVs and cameras, while still dominating the streaming industry.
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A brief history of Roku
Roku Company was founded by Anthony Wood in 2002, though the company didn’t release any Roku player until 2008. The first Roku player, released in 2008, served as a Netflix player that allowed people to stream Netflix videos to TV. Roku company continued to release updated models of the Roku player yearly between 2009 and 2013. The company partnered with Hisense and TCL to release its first-ever Roku TV in January 2014. Since then, Roku company has continued to manufacture smart TVs in addition to streaming devices.
Who Owns Roku
Anthony Wood, the founder of Roku, is the owner and CEO of Roku company. Anthony Woods is also the largest shareholder of the company, as he holds 12% shares.
Roku Mission Statement
Roku’s mission statement is “to be the streaming platform that connects and benefits the entire TV ecosystem around the world.”
How Roku works
Roku works as a streaming device that allows people to watch videos via downloadable channels. Although Roku now exits in various forms, they all work as stated. New Roku models exist as either a streaming stick that you can plug directly into USB ports, or as a Roku box with a power adapter and HDMI cable. Roku can also exist as a built-in Roku in smart TVs. All three forms require an internet connection to work. The setup is quite easy, as you don’t need any special installation to start streaming videos. All you need is a Roku account after setting up an internet connection.
Once, you’ve set up a Roku and added a payment method, you can begin subscribing to services like Netflix or buy/rent movies. A few examples of services available on Roku are Hulu, HBO Max, Prime Video, and Pluto TV. The basic features of a Roku Player include the following:
Smart Search
Roku has a universal search function that allows users to search for content using almost any slight detail they know about the content they intend to view. For instance, users can search for a movie using one of the actors’ names or a popular dialogue in the movie.
Connection to Other Devices
Roku is designed to connect to other devices, such as a smartphone. Connecting Roku to a smartphone allows you to use the smartphone as a remote control for the Roku player. Also, you can stream content from Roku to smartphones after connecting the two together.
The latest models of Roku devices support screencasting and mirroring from smartphones to bigger TV screens. To make this happen, you must simultaneously connect Roku to your smart TV and smartphone. Thereafter, enable the screen mirroring feature in Roku’s settings menu. Google smart speaker is another major device you can connect to Roku for seamless control of the Roku player.
How Roku makes money
Roku company makes money from the following:
Hardware Sales
The sales of Roku streaming devices generate a lot of money for the company. Some of the devices the company sells to make money include the Roku streaming stick, Roku smart TV, and Roku Streambar. All these devices and many others are available on Roku’s website, as well as third-party online shops like Amazon. Recently, Roku company started expanding sales by making other products like video doorbells, cameras, and smart lights.
Subscriptions
Although Roku’s service itself requires no subscription, other streaming services such as Showtime, Epix, and Netflix embedded in it require subscriptions. People can subscribe to streaming services directly from a Roku device, as the Roku company already provides an easy way to add a payment method and subscribe to services. Roku earns specific commissions from each subscription, since the company partnered with the streaming services.
Advertising
The Roku company generates lots of money from adverts. Ads usually come up between contents and also when users pause videos. The company has invested well in ad services to suit both advertisers and viewers. For instance, Roku has a platform called OneView, allowing advertisers to monitor their ads’ performance.
Roku users can shop adverts they see directly on their screen, though for now, this feature is available only for ads from Walmart. But eventually, the feature will be available for ads from various other online stores as Roku continues to partner with more advertisers to make direct purchases possible. The major factors determining the amount of ad revenue a particular Roku user fetches for the company include the user’s geographical location, consumption length, and the kind of content the user watches.
Branded Content
Roku has a brand studio that allows businesses to create special awareness of themselves and their products to all Roku users. While branded content is also a form of ad, certain factors make it special. For instance, branded contents are accessible on search tiles and the Roku home screen, just like regular channels and content. Also, unlike regular ads, branded content doesn’t have the regular 30 seconds display time limit.
The Roku Brand Studio also hosts interesting TV programs aimed at promoting specific brands and content. For instance, a particular show on Roku called “Roku Recommend” promotes certain content available on Roku channels by highlighting those contents as the best content.
Licensing
Roku now licenses its operating system (OS) to other tech companies. Currently, brands like Philips Hitachi, JVC, and about twelve other companies have licensing deals with Roku. More tech companies will continue to buy licenses from Roku as people worldwide continue to crave smart TVs with built-in Roku. Each time people buy products using Roku OS, and activate them, Roku company earns a certain amount, which depends on the licensing deal between Roku and the product manufacturer.
Roku Business Model Canvas
Let’s take a look at the Roku Business Model Canvas below:
Roku Customer Segments
Roku’s customer segments consist of:
- Businesses/Advertisers: Businesses that intend to promote themselves or their products and services fall within this category;
- Streamers: People who desire entertainment or information from video streaming fall within this category;
- Hardware Buyers: This category includes people who purchase hardware products such as Roku players and smart TVs;
- Streaming services: Streaming services like Netflix and Hulu are part of Roku’s customer segments;
- License buyers: Third-party companies like Philips, who buy licenses from Roku company, fall within this category.
Roku Value Propositions
Roku’s value propositions consist of:
- Businesses/Brands: With millions of Roku users worldwide, Roku serves as a good medium to promote brands;
- Streamers: Roku provides endless entertainment and quality information to streamers;
- Hardware Buyers: Buyers get high-quality Roku products at very affordable prices, especially when the prices of these products are compared to the price of cabled devices that offer the same services;
- Streaming services: Roku helps streaming services get more viewers as Roku devices are accessible to almost everyone, especially in countries like the U.S., Mexico, and Canada, where Roku is the top streaming platform;
- License buyers: Companies that use Roku’s license to incorporate Roku features into tech products usually get more sales, as people now prefer TVs with built-in Roku to other kinds of smart TVs.
Roku Channels
Roku’s channels consist of:
- Website
- Third-party Stores
- Resellers
Roku Customer Relationships
Roku’s customer relationships consist of:
- Customer Service
- Website
Roku Revenue Streams
Roku’s revenue streams consist of
- Hardware sales
- Subscriptions
- Advertising
- Branded content
- Licensing
Roku Key Resources
Roku’s key resources consist of:
- Digital Assets
- Employees
- Partnership with streaming services
Roku Key Activities
Roku’s key activities consist of:
- Manufacture devices
- Sells ads
- Process payments
- Maintain streaming platform
Roku Key Partners
Roku’s key partners consist of:
- Advertisers
- Streaming services
- Tech companies
Roku Cost Structure
Roku’s cost structure consists of:
- Salaries
- Platform Maintenance fee
- Manufacturing & Distribution
- Marketing
Roku Competitors:
- TiVo: The origin of TiVo dates back to 1999 when TiVo first became available as a digital video recorder that allowed people to record their favorite TV shows. Now, TiVo has improved to a streaming company with thousands of shows, movies, and videos. Just like Roku, it has an appreciable integration experience. So far, TiVo has gained popularity in places like Australia, Mexico, New Zealand, the United Kingdom, and Canada;
- Vudu: Vudu is a streaming service where users can purchase or rent digital content like movies and TV shows. Users can also watch certain content for free with ads inclusive. Tony Miranz and Alain Rossmann launched Vudu in 2007, and it operated independently until 2021, when it merged with FandangoNOW, which is another popular streaming company. The company’s name remains Vudu after the merging;
- Netflix: Netflix is a streaming and video-rental company. Reed Hastings and Marc Randolph founded the company jointly in 1997. Netflix started an online subscription service in 1999, though shows were sent by mail to subscribers as DVDs. But now, Netflix has improved to a full online streaming service. Netflix has managed to dominate the streaming market to the point that some media creators produce videos to be streamed only on Netflix;
- Hulu: Hulu is a streaming service owned by The Walt Disney Company. Although Hulu is part of the Streaming company that has a partnership deal with Roku, it still remains one of Roku’s top competitors since Hulu has its own facilities to operate independently. Hulu is so popular in the U.S., to the point of having over 40 million subscribers.
Roku SWOT Analysis
Below, there is a detailed swot analysis of Roku:
Roku Strengths
- Large number of users: Millions of people around the world now use Roku to stream their favorite content. As of January 2023, Roku had 70 million mostly active users from various parts of the world;
- A leader in the industry: In terms of smart TV products, Roku seems to be leading, especially in the US and Canada. Even the majority of the TVs that other tech companies manufacture use Roku software;
- Deep Industry Knowledge: Roku has deep knowledge of how to reach the target audience with appropriate streaming experience as well as ads. Over the years, the company has gathered insight from its users. So far, the company has used its deep knowledge to make great innovations and lead the streaming industry.
Roku Weaknesses
- Limited Geographical Reach: Roku is currently not functional in some parts of the world. Its market focuses excessively on the US. For instance, more than 90% of Roku’s revenue comes from the US. The company needs to work towards dominating other geographical locations too, rather than focusing too much on markets of a few countries;
- Decline in Share Prices: Recently, in 2022, the share price of Roku company fell significantly, and the occurrence has discouraged some investors from investing money in the company.
Roku Opportunities
- International Market Expansion: There are several international markets Roku can expand into to get more revenue. Expanding into other international markets will not only help the brand make more profits, but also build a universal reputation for itself.
Roku Threats
- Intense Competition: Lots of companies in the streaming industry are competing keenly with Roku. If Roku doesn’t keep improving its services and introducing new features, its competitors might win over a significant number of Roku users. Thus, reducing Roku’s revenue or even forcing the company to close down.
Conclusion
The level of innovation that Roku company has shown so far is almost matchless, and that is one of the major factors that has helped Roku achieve the success it has achieved so far. However, at this stage, the company needs to start expanding to the international market to maximize profits.