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Speaker 1: Welcome to Strictly Business, the podcast in which we speak

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Speaker 1: with some of the brightest minds working in the media

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Speaker 1: business today a man Drew Wallenstein with Variety. Roku is

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Speaker 1: on a roll, its stock price grew about a hundred

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Speaker 1: and fifty and the streaming platform shows no signs of

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Speaker 1: cooling down this year thanks to some interesting deals getting

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Speaker 1: done in recent months, from finally securing the HBO Max

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Speaker 1: app to its licensing of the Quimby content catalog. Yes

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Speaker 1: you heard that right, Quimby. So who better to talk

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Speaker 1: to than the man who got those deals done at

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Speaker 1: Roku as Senior VP of the Platform Business, Scott Rosenberg.

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Speaker 1: I got to speak with Scott on January four at

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Speaker 1: the Variety Entertainment Summit, a CS partner program. We'll have

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Speaker 1: this special interview coming up in just a moment. Welcome

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Speaker 1: back to the Strictly Business podcast, where I'm joined today

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Speaker 1: by Scott Rosenberg, Senior VP of the Platform Business at Roku. Scott,

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Speaker 1: I just want to start with some data points from

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Speaker 1: our Variety Intelligence platform that show just how incredible the

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Speaker 1: growth story at Roku has been. Clearly, you guys have

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Speaker 1: been on the rise in a number of key metrics

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Speaker 1: for years now, but when you look at the last

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Speaker 1: twelve months, it's especially impressive. You've added over ten million

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Speaker 1: subscribers of the last four quarters, over six billion hours

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Speaker 1: of streaming hours over the same period. No wonder, you're

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Speaker 1: the leader in the connected TV space as you go

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Speaker 1: up against some much bigger competitors. And look, I've got

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Speaker 1: my theories as to how things are going so well

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Speaker 1: for you, but I want to hear it from you.

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Speaker 1: What are you guys getting right in that's it seems

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Speaker 1: like you're hitting all cylinders. Yeah, thanks for the for

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Speaker 1: the it up, Andy, I appreciate it and for having

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Speaker 1: us on. It was an amazing year for Roku. As

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Speaker 1: he said, we uh, we cleared fifty million active accounts,

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Speaker 1: which is our proxy for households. We had fifty five

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Speaker 1: growth and streaming hours that's our measure of user engagement.

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Speaker 1: Where the number one TV in the US thirty eight

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Speaker 1: percent of all smart TVs sold in the US were

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Speaker 1: powered by the Roku operating system, were number one in

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Speaker 1: Canada as well. You know, I'd attribute this to really

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Speaker 1: two factors. One is this is a secular transition. All

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Speaker 1: television is going to be streamed everybody's gonna leave the

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Speaker 1: trade traditional pay TV package. That was a trend that

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Speaker 1: was well underway before the pandemic, but the pandemic really

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Speaker 1: accelerated the transition, and that really owes to the drying

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Speaker 1: up of live sports and news. So the pay TV

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Speaker 1: package just wasn't as attractive to the consumers who were

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Speaker 1: still in the pay TV package, and it really created

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Speaker 1: the incentive for consumers to cut the court out. A

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Speaker 1: third of US households have now cut the cord. Among

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Speaker 1: our universe of Rocca consumers who've cut the cords have

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Speaker 1: said that they're very satisfied, they're not going back. So

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Speaker 1: the pandemic really pulled forward accelerated a bunch of of

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Speaker 1: change that was already well underway. And roc has done

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Speaker 1: well because of our product offerings, because we keep the

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Speaker 1: user experience simple and intuitive. It's a great content line up,

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Speaker 1: and uh, the value equations really there. You know, you

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Speaker 1: can get into a Roku streaming stick for twenty nine bucks,

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Speaker 1: or you can get an incredible sixty in television with

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Speaker 1: Rocca built in. But as you referenced, clearly the pandemic

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Speaker 1: had its impact with this shelter at home audience. That

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Speaker 1: was just sort of tailor made for Roku. You've also

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Speaker 1: got a lot of streaming services coming online in are

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Speaker 1: I assume you saw a lot of sampling and Roku

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Speaker 1: was right there for a lot of these new players. Yeah,

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Speaker 1: twenty was a great year for consumers. You know, you

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Speaker 1: had Disney Plus launch in in late twenty nineteen, you

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Speaker 1: had Peacock, you had HBO Max launch. Just last week

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Speaker 1: we had Discovery Plus launch. All of these services are distinct,

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Speaker 1: their unique, but they all buy the proposition for consumers

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Speaker 1: to cut the chord and move to streaming. And uh,

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Speaker 1: you know that's that's also a benefit that accrues to

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Speaker 1: a platform like Crocus. As the experience gets richer, as

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Speaker 1: the content gets richer, consumers move more of their TV

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Speaker 1: time to our to our devices, and that that's ultimately

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Speaker 1: our our goal, our strategies to capture more households, but

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Speaker 1: also more time in our households. You seem pretty sure

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Speaker 1: though about you know, mass chord cutting, and I gotta say,

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Speaker 1: I wonder, uh, during the pandemic, we actually saw some

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Speaker 1: of those numbers slow a bit as live TV came online.

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Speaker 1: I mean, do you really think it's it's going to

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Speaker 1: be quite the free fall that some make it out

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Speaker 1: to be. I do, and I think you, uh, well,

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Speaker 1: it depends I guess on your definition of free fall.

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Speaker 1: I would call double digit ratings declines year over year

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Speaker 1: for many years in a row free fall. Um. You know,

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Speaker 1: we did see when sports came back. We saw some

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Speaker 1: some users who had switched to streaming go back, but

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Speaker 1: they actually didn't restore a percent of their linear viewership

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Speaker 1: at when sports came back. So you have dynamics like

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Speaker 1: that where consumers just don't return back to where they were.

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Speaker 1: I think. In another area, in theatrical releases, you've got

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Speaker 1: folks like Warner uh experimenting during the pandemic by bringing

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Speaker 1: seventeen titles to HBO Max. You've got Disney doing Mulan

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Speaker 1: and a bunch of other titles. Uh. You know. I

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Speaker 1: think the question will be coming out of the pandemic

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Speaker 1: is does day and date movie experiences to that? Does

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Speaker 1: that last after the pandemic the consumers get used to it,

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Speaker 1: demand it and really enjoy it as an experience, to

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Speaker 1: studios and distributors get comfortable with it as a as

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Speaker 1: a new distribution model, we'll see. But but consumers are

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Speaker 1: the winners here, and I think they set up a

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Speaker 1: precedent and a pressure to uh to support some of

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Speaker 1: these new consumption models. Well, speaking of pressure, you know,

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Speaker 1: I gotta wonder whether Roku is somewhat like Netflix, which

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Speaker 1: also obviously had a gangbuster but kind of already warned

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Speaker 1: the street like, hey, don't expect to be like this.

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Speaker 1: Do you guys feel twenty one is going to be

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Speaker 1: a tough act to follow simply because twenty was such

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Speaker 1: a unique set of circumstances. Well, you know, I won't

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Speaker 1: comment on the future too much except to say that

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Speaker 1: I still think that there's an enormous amount of television consumption,

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Speaker 1: even in a more mature market like the States that

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Speaker 1: still has to move to streaming. You look at um

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Speaker 1: the breadth of content that's available but still coming to streaming.

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Speaker 1: Then you look abroad, you look internationally, where streaming is

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Speaker 1: not not not as far along as the States are.

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Speaker 1: I think that UH O T T streaming is still

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Speaker 1: a young market with lots of long term potential growth.

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Speaker 1: Let's talk a bit about that long term potential. I mean,

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Speaker 1: how do you see the the the TV advertising market

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Speaker 1: changing in in the next five years? Given connected TV

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Speaker 1: seemed to have a real breakthrough in T well. I

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Speaker 1: do think that television marketers are coming to grips with

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Speaker 1: the fact that they just can't reach all TV households anymore.

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Speaker 1: When a third of US households have cut the cord,

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Speaker 1: a traditional pay TV investment program by an ad agency

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Speaker 1: isn't going to reach a third of of TV households.

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Speaker 1: So that's the That's the first big step I think

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Speaker 1: for for TV marketers as they think about streaming is

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Speaker 1: just to keep reaching TV viewers while they're on the

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Speaker 1: new the new experience. Over time, though, what will play

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Speaker 1: out is just that that streaming advertising is a better

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Speaker 1: mouse trap than traditional linear television. I think, you know,

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Speaker 1: consumers expect a better ad experience. They aren't gonna tolerate

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Speaker 1: at infinitem fift sixteen minutes on the hour of of

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Speaker 1: untargeted ads. So so there's that consumer pressure, uh. But

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Speaker 1: for for marketers who have grown to expect their media

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Speaker 1: to get smarter, to be more targetable, to be more measurable,

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Speaker 1: to be able to optimize to a site visit or

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Speaker 1: a product purchase, streaming also offers those capabilities, and so

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Speaker 1: I think it's it's both a push and a pull

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Speaker 1: that's gonna ultimately cause yet more budgets to move out

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Speaker 1: of traditional television into streaming. You know, I think what

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Speaker 1: people really began to understand about your business in was

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Speaker 1: the so called you know date you brought to the dance,

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Speaker 1: was the divice business and getting into TV operating systems.

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Speaker 1: But that was really just kind of a prelude to

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Speaker 1: uh focus on ad monetization, and I think that's really

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Speaker 1: what's driven the growth here. Um, but is this market

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Speaker 1: mature enough yet? I mean, you're obviously very bullish on it,

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Speaker 1: but they're there at least in it feels like there's

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Speaker 1: still a ways to go for connected TV to to

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Speaker 1: truly be superior. Well, I mean I'm biased, of course,

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Speaker 1: I think from a consumer experience perspective, it's already superior.

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Speaker 1: Is it yet commanding the kind of dollars and investment

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Speaker 1: commensurate with the consumer viewership that's already taking place? The

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Speaker 1: answer to that is not yet, and I think we'll

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Speaker 1: see that start to continue to play out over time.

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Speaker 1: You know, Roku last twelve months had had an art

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Speaker 1: revenue per user of about twenty seven dollars, which has

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Speaker 1: been growing healthily along with strong consumer growth, but that

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Speaker 1: twenty seven dollars is still a very modest portion of

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Speaker 1: what a US TV household is worth in terms of

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Speaker 1: what they pay for services and the value of the

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Speaker 1: advertising that they experience. So I think that shows you

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Speaker 1: just how how young, UH the streaming market is and

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Speaker 1: how significant the the upside potential UH is that's out

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Speaker 1: there in terms of your your reference to our business model.

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Speaker 1: Our goal has always been to be in a in

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Speaker 1: a devices business. That's the end part of our business,

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Speaker 1: but it's not a particularly profitable part of the business.

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Speaker 1: It's a user acquisition vehicle. UH. The The yang here

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Speaker 1: is the services the economics that we derive after you

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Speaker 1: take your Roku home and set it up. And as

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Speaker 1: you point out, that's been heavily about advertising, UH, and

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Speaker 1: that's that's There are a couple of reasons for that.

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Speaker 1: One is advertising funds about one of every two dollars

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Speaker 1: that funds the overall TV ecosystem today, the other the

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Speaker 1: other dollar coming from what consumers pay their pay TV

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Speaker 1: provider UM. But UM. It's also because Roku has a

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Speaker 1: platform has a unique value add for marketers who are

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Speaker 1: looking to move their their dollars. We have a direct

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Speaker 1: relationship with our consumers. We have lots of bespoke ad

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Speaker 1: experiences that we can create for brands. It puts us

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Speaker 1: in a unique position to help brands migrate out of

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Speaker 1: traditional television. Got it um. You mentioned HBO Max earlier,

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Speaker 1: which was probably a big growth driver in in the

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Speaker 1: last month of the year with all those movies first

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Speaker 1: run thirty day windows. But it took months and months

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Speaker 1: for HBO Max to finally show up on Roku after

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Speaker 1: pretty protracted negotiations. Is it fair to say that you

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Speaker 1: finally gave HBO Max access to rokus hubs because Warner

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Speaker 1: basically leverage that movie move and you couldn't have possibly

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Speaker 1: afford to not have them on the platform. Well, I

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Speaker 1: won't comment in into much d to in those negotiations.

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Speaker 1: We're very glad to have gotten a deal done, as

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Speaker 1: I think they are as well. Both parties had a

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Speaker 1: lot to offer. Roky, with fifty million active accounts is

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Speaker 1: a pretty important platform partner for any service in streaming.

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Speaker 1: But as you point out, HBO Max is a great service,

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Speaker 1: great movies coming. I watched Wonder Woman on the with

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Speaker 1: my two teenage kids. You know, these deals sometimes take longer,

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Speaker 1: but ultimately our goal is to create value for the partners.

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Speaker 1: And UH, these these distribution partnerships are different from a

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Speaker 1: traditional cable TV programmer carriage dispute in that those deals,

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Speaker 1: those disputes are almost always about a fixed and declining pie,

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Speaker 1: where the parties are really trying to preserve economics in

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Speaker 1: a declining ecosystem. O T T S tell really different.

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Speaker 1: It's it's up until the right and so that the

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Speaker 1: trick in these deals is to create a win win

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Speaker 1: relationship with a with a partner like Warner Media, where

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Speaker 1: when they win, Roku wins, and of course the consumer

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Speaker 1: wins by getting the service live. We we did it

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Speaker 1: with them. We got Discovery Plus Live. Last week, we

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Speaker 1: got Peacock Live. We're really excited about these services. But

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Speaker 1: you make that comparison that I think a lot of

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Speaker 1: people were making, uh to sort of the cable business

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Speaker 1: and these blackout battles that are all too common, And

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Speaker 1: you know is what does Hollywood need to know about

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Speaker 1: Roku's negotiations stands is this going to be Are we

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Speaker 1: going to see a lot more of this? Or has

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Speaker 1: Hollywood the content companies come around to better understanding where

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Speaker 1: Rocco is after a few really high publicized tussles. Well

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Speaker 1: I think, by the way, what made those higher profiles

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Speaker 1: just the industry hadn't seen them before, so it was

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Speaker 1: it was a it's a new thing. I mean, like

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Speaker 1: I think it's all our jobs to put these services

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Speaker 1: in great content in front of the consumer, and it's

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Speaker 1: it's particularly our job as a distribution platform to serve

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Speaker 1: up to our consumers what they want to watch. So um,

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Speaker 1: you know, I don't have any uh any particular messages

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Speaker 1: for our partners. We uh we look for you know,

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Speaker 1: when when deals where Roku gets ah, you know, a

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Speaker 1: share of the economics typically in the subscription service if

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Speaker 1: it's a paid service, and a share of economics and

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Speaker 1: in the advertising side. But our job as Roku is

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Speaker 1: to drive the success of these services. If if Discovery

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Speaker 1: Plus goes live on Roku and isn't successful, nobody wins,

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Speaker 1: not Discovery, not Roku, not the consumer. And that's ultimately

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Speaker 1: our d n A as a company is to get

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Speaker 1: into distribution mode, partner deeply with these content providers and

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Speaker 1: make sure that they get a lot of tracks. And

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Speaker 1: I mean there are several things you're trying to get

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Speaker 1: as you make these deals. There's subscription revenue, advertising revenue data. Um.

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Speaker 1: What has been the bigger sticking point as you negotiate

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Speaker 1: these deals, is there one area where it's like, you know,

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Speaker 1: the constant companies just don't seem to understand what Roku needs. Uh,

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Speaker 1: you know, what we agree or disagree on really depends

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Speaker 1: on the partner. Um. You know, advertising can be more contentious. UM,

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Speaker 1: But I think that's also because this part of the

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Speaker 1: business is somewhat distinct and evolving quickly relative to traditional television.

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Speaker 1: And traditional television programmer and an m v p D

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Speaker 1: would split two minutes on the hour to the m

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Speaker 1: v p D and it's a it's the cleansp O

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Speaker 1: T T streaming. Ad tech looks a lot more like digital,

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Speaker 1: and so how the ad tech works is a lot

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Speaker 1: more complicated. Uh, you know, just the plumbing of of

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Speaker 1: how two parties collaborate on things like ad insertion and

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Speaker 1: targeting and measurement is more complicated. So sometimes that's a rub.

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Speaker 1: But there again, I just think the upside is huge.

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Speaker 1: We're really at the precipice of reinventing how TV advertising

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Speaker 1: is going to work for the next couple of decades

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Speaker 1: and it's there's huge value creation potential and we as

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Speaker 1: a platform have great tools that we can provide to

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Speaker 1: our programming partners as they as they move their ad

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Speaker 1: sales into this more advanced phase TV advertising. We need

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Speaker 1: to take a quick break, but we'll be back with

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Speaker 1: more from Scott Rosenberg. And we're back with Scott Rosenberg,

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Speaker 1: Senior VP of the Platform business at Roku. Another high

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Speaker 1: profile deal that got you guys some attention recently with Quimby,

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Speaker 1: which you know you licensed their content from their now

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Speaker 1: defunct app. We haven't seen this kind of content grab

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Speaker 1: from Roku before, so it begs the question is this

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Speaker 1: is the beginning of a new phase, the first of

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Speaker 1: many such deals or more of an experimental one off.

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Speaker 1: I would say neither, but you know, just to speak

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Speaker 1: on behalf of Quimby, we thought from the time to

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Speaker 1: service to launch that it would do well in connected TV.

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Speaker 1: It wasn't part of their launch strategy, so it became

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Speaker 1: an opportunity of course towards the end of last year

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Speaker 1: and we jumped on it. It's seventy plus shows, hundreds

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Speaker 1: of hours, ten Emmy nominations to two wins for free ration,

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Speaker 1: and just uh an awesome who's who of talent um

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Speaker 1: uh in these shows. Some of it's on the more

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Speaker 1: experimental end, some of it is just uh, you know,

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Speaker 1: you could see it having and produced for the for

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Speaker 1: the ten foot environment from the first place. So for us,

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Speaker 1: it's an exciting opportunity to put amazing content into the

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Speaker 1: Roku channel, which has grown very very quickly for Roku,

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Speaker 1: and it's a chance to put this great content in

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Speaker 1: an av odd in an AD supported business model. Of course,

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Speaker 1: Quimby was a subscription based service, and so we think

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Speaker 1: both the combination of Roku scale and the scale of

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Speaker 1: Roku channel plus the caliber content bodes very well for

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Speaker 1: the Quimby library. It's going to do great well. But

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Speaker 1: before I ask you more about the Roku channel, I mean,

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Speaker 1: it sounds like you're making the assumption that you know,

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Speaker 1: with Quimby, this was good content locked up in a

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Speaker 1: not quite right for the marketplace vehicle whose problems had

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Speaker 1: nothing to do with the content. But doesn't it give

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Speaker 1: you some pause. Isn't it possible that Quimby failed because

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Speaker 1: of the content? Uh? Well, you know, look, I suppose,

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Speaker 1: but we don't think that's the case. Most of the

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Speaker 1: content actually never saw the light of day. We've got

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Speaker 1: a couple of dozen shows that will premiere on Roku.

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Speaker 1: They you know, they were part of a staged rollout

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Speaker 1: by Quimby. So I really don't think it's about the content.

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Speaker 1: It might have been how how it was presented. I mean,

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Speaker 1: of course, launching a service like that in the middle

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Speaker 1: of the pandemic was was unfortunate timing for them. Um,

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Speaker 1: we think the content is going to do great. It's

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Speaker 1: a lot of fun. I mean, the shows are are

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Speaker 1: really fun, really broad spectrum. They'll apeal to younger users.

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Speaker 1: We think they'll resonate very strongly with adults eighteen to

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Speaker 1: thirty four. It was a key demographic for anybody in

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Speaker 1: the ad business. Um, we're we're excited, and I get that,

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Speaker 1: and but it also sounds like you're stopping short of

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Speaker 1: saying and this is the beginning of a shopping spree.

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Speaker 1: We are now the big buyer. All the agencies come

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Speaker 1: on in which I gotta ask, like, so, why aren't

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Speaker 1: you guys going on some big spree, Because you could

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Speaker 1: argue what makes the most sense to grow the Roku

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Speaker 1: channel is for you to load up like you're the

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Speaker 1: next Netflix or or Disney Plus. Well, yeah, I won't

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Speaker 1: comment on into the future too much except to say

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Speaker 1: that the Rocky Channel has grown very significantly over time

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Speaker 1: and more than doubled last year. It's a top ten

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Speaker 1: channel on the platform in terms of reach and hours,

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Speaker 1: forty titles and fifty live linear channels. We have shown

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Speaker 1: over time our ability to invest more put uh greater

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Speaker 1: breadth than depth of content into the Roku channel, and

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Speaker 1: the acquisition of quimby Is is another step in that process. Um,

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Speaker 1: we will continue to invest. There's still a lot more

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Speaker 1: viewership and great content to put into the Roka channel.

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Speaker 1: But it's not a it's not a signal of a

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Speaker 1: giant spending spree, as you said, got it? Um, Well,

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Speaker 1: you of course still play host to a lot of

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Speaker 1: the streaming services that are on various lines of spending sprays,

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Speaker 1: and and I'm just curious to get your perspective, as

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Speaker 1: you know, going back all the way from Netflix to

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Speaker 1: now Discovery Plus and soon Paramount Plus and who knows

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Speaker 1: how many more pluses do you guys have a take

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Speaker 1: in terms of how you see the so called streaming

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Speaker 1: wars playing out? Because I refuse to believe for one,

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Speaker 1: that is just going to be Oh, sure, they'll be

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Speaker 1: anywhere from ten to fifteen different multibillion dollar, completely separate

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Speaker 1: streaming services out there. But maybe you see different. What

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Speaker 1: do you see? Well? I mean, I do agree with

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Speaker 1: what you're hinting at, which is that the average consumer

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Speaker 1: does have some basic capacity in their household to pay

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Speaker 1: for television. It's also our view that that's almost certainly

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Speaker 1: lower than what it's been in pay TV. Most consumers,

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Speaker 1: you know, in addition to a better user experience, are

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Speaker 1: looking for some savings as they cut the cord and

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Speaker 1: move to move to streaming. So there is some capacity.

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Speaker 1: I don't think we know what it is yet. Is

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Speaker 1: it three services? Is it five? Is it seven? But

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Speaker 1: it's it's probably not ten or twelve services, And so

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Speaker 1: uh that that suggests that there in any given market,

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Speaker 1: in any given territory, there there can only be a

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Speaker 1: certain number of scaled up services. I don't think that

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Speaker 1: that precludes niche services. One of the things about streaming

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Speaker 1: is it like the Internet, it allows all shapes and

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Speaker 1: sizes to coexist at the same time. But in terms

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Speaker 1: of the disneys, the Netflix is the the Amazons and

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Speaker 1: their capacity to invest I think there'll be a finite

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Speaker 1: number in any given market. More importantly, though, in terms

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Speaker 1: of the Rookie Channel and things like our our Quimpie

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Speaker 1: deal is there is a massive amount of content being

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Speaker 1: produced and available on the shelves from historic productions, and

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Speaker 1: not all of that content is gonna fit within the

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Speaker 1: strategy or brand of the the set of big streaming

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Speaker 1: services that land on your home screen. Where does that

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Speaker 1: content live, how does it consumer find it, where does

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Speaker 1: it get aggregated? That's ultimately, in our view, the opportunity

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Speaker 1: for something like the Roku Channel. There is great content

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Speaker 1: out there, owned by entities that are not trying to

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Speaker 1: be Disney Plus, not trying to be Peacock, but who

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Speaker 1: still want to monetize that content get in front of consumers.

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Speaker 1: And that's where a service like the Roku Channel can

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Speaker 1: play a value, a valuable role surfacing that content outside

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Speaker 1: of one of the set of apps that the consumers

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Speaker 1: downloaded and subscribe to. So you're referencing the ton of

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Speaker 1: niche services out there, uh, anyone from you know a

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Speaker 1: m C to britt Box to all those you know

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Speaker 1: it does Roku Channel ultimately perhaps solve the content discovery

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Speaker 1: problem out there where there's just too many, you know,

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Speaker 1: too many ports of call where content resides. And Roku

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Speaker 1: channel sort of represents a consolidation of that. Yeah, I

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Speaker 1: think so. And in any big service that's going to

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Speaker 1: house a lot of content needs to be an expert

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Speaker 1: at personalization, at machine learning, because once you house in

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Speaker 1: the Roky channel, it's like forty thou titles, then it's

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Speaker 1: another fifty or seventy thousand when you count the premium

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Speaker 1: services like HBO and Showtime others that are that have

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Speaker 1: been available. You need to layer on machine learning recommendations

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Speaker 1: technology just to help the consumer get through that content

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Speaker 1: and find something that they want to watch, to pick

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Speaker 1: up something that they were previously watching. That's a big

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Speaker 1: focus for us at Roku is using technologies to help

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Speaker 1: consumers discover and get back into a video viewing session faster.

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Speaker 1: It sounds like is gonna be just as interesting a

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Speaker 1: year for you guys as was. I wish you the

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Speaker 1: very best and looking forward to seeing how you do.

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Speaker 1: Thanks for your time, Scott Ye, thank you nice chatting.

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Speaker 1: This has been another episode of Strictly Business. Tune in

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Speaker 1: next week for another helping of scintillating conversation with media

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Speaker 1: movers and shakers, and please make sure you subscribe to

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Speaker 1: the podcast to hear future episodes. Also leave a review

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Speaker 1: in Apple Podcasts and let us know how we're doing