Roku is the leading television streaming platform in the United States by hours streamed. Total streaming rose by 68% to over 40 billion hours in 2019. Net revenue was $1.13 billion, with a gross profit of approaching half a billion dollars, although the company made net loss of nearly $60 million in 2019. Roku predicts that pay television households in the United States will fall below 50% by 2024, a number that some might question.

Roku has 36.9 million active accounts, the vast majority of them in the United States, generating average monthly revenues of $23.14 dollars, up 29% year-on-year. About half of its user base does not have a traditional television subscription package.

In the fourth quarter of 2019, Roku users streamed 11.7 billion hours, an increase of 60% year-on-year.

Total revenue in 2019 was $1.23 billion, producing gross profit of $495 million but research and development costs were $265 million, sales and marketing cost $179 million, and other costs were $116 million, producing an operating loss of $65 million and a net loss of $59.94 million.

Anthony Wood, the founder and chief executive of Roku, remarked to analysts: “10 years ago, Netflix was about all I could stream on my TV and in fairly low resolution. But recently, I enjoy streaming the Super Bowl in brilliant 4K via FOX Sports on my Quantum Dot Roku TV with my Roku wireless speakers and subwoofer.”

“In fact, streaming is often the easiest and sometimes the only way for people to watch in 4K,” he said. “Most TV is still delivered the old-fashioned way. Streaming still has a long way to go, and the streaming decade lies before us.”

Roku predicts that by 2024, roughly half of all television households in the United States will have cut the cord or never had traditional pay television.

In its quarterly earnings report, Roku wrote: “While streaming became mainstream in the last decade, it is still a minority of TV viewing. We have now entered the streaming decade when we believe consumers around the world will choose streaming as their primary way of viewing TV.”

Pay television penetration in the United States was around 75% in 2019, down from 79% in 2017 and 83% in 2015. That sounds like a large decline, of an average of 1.8% per year.

So, is it likely that pay television penetration will fall by a further 25% in four years? Perhaps not. If the decline were to continue at the current rate it would not fall below 50% until the early 2030s.

Of course, such trends are not necessarily linear. As more people switch away from traditional television subscriptions it is possible that this will accelerate as a result of alternative options coming to market.

We also note that many of those alternative offerings come from the same major media and communications corporations, so value may simply shift from one form of distribution to another.

Nevertheless, Roku is optimistic about its future. It says that television advertising is in the early stages of moving to streaming, creating tremendous opportunity for Roku as the leading over the top advertising platform. It believes that around the globe, television viewing will continue to transition to streaming television.

It has launched Roku TV models in the United States, Canada, Mexico, Brazil and the United Kingdom. It says that nearly one in three smart televisions sold in the United States in 2019 were Roku TVs, up from one in four the previous year.

Roku acquired dataxu, a demand-side advertising platform provider, for $150 million in cash and stock in October 2019.

In 2020, Roku expects to reach $1.6 billion revenue, or over 40% annual growth. Around three quarters of that it expects to come from its platform revenues, including advertising, rather than hardware sales, which it sees as a driver of the platform business.

That is no mean feat, for a company that started with its first Netflix streaming box in 2008. To put it in perspective, the total television advertising market is worth about $70 billion in the United States and globally around $200 billion. So Roku still has some way to go.