Roku Sees Slowdown in Account Growth as Supply Chain Issues Dent TV Market

Roku is proving it’s still the biggest connected TV player out there, hitting 56.4 million active accounts in the third quarter of 2021. But Roku’s account growth has slowed notably throughout the year, from adding 5.2 million in the fourth quarter of 2020 to 1.3 million this quarter. That’s down from the 1.5 million new accounts the connected TV company added last quarter. In a letter to shareholders, Roku said it believes the slowdown is due to the global supply chain issues. Streaming hours increased by 0.7 billion to reach 18 billion, a notable difference from the drop of nearly a billion hours last quarter. Accounts averaged 3.5 streaming hours a day, consistent with last quarter. The company’s AVOD service The Roku Channel remains a bright spot for the platform, seeing streaming hours more than double year over year. The company premiered 23 new Roku Original titles, and the AVOD was also a top five channel on the platform by active account reach. “We've made a lot of progress. We've greenlit or renewed a bunch of series with Roku Originals, and our scale is such that we can experiment and go broader in the sort of things that we're looking to do in The Roku Channel,” Scott Rosenberg, Roku’s svp of platform business, told reporters ahead of the company’s earnings call. Roku is set to debut its first feature length film, Zoey’s Extraordinary Christmas, on Dec. 1, after rescuing the cancelled series from NBC, which it hopes will further drive eyeballs to the AVOD channel. Rosenberg pointed to the addition of 17 linear channels to The Roku Channel, bringing the total past 200, as another growth driver for the AVOD. “It's a portfolio strategy, you’ll certainly see more from us on the Originals front, but you’ll see lot more of everything else as well as the scale of The Roku Channel supports us doing more with content, and in turn helps us attract more advertisers to invest more heavily,” said Rosenberg. Revenue grew 51% year over year to hit $680 million. The company’s platform segment—which includes advertising and subscription revenue—jumped to $582 million after revenue exceeded half a billion dollars for the first time in the segment’s history last quarter. Supply chain issues continue In addition to attributing the slowdown in account growth to supply chain issues, Roku also attributed the drop in Roku player unit sales to the ongoing problems. Player gross margins were down 15% which the company expected. In Q1, CFO Steve Louden anticipated player margins going slightly negative in Q2 and more negative in the back half. And as for new entrants into the smart TV marketplace like Amazon and Comcast XClass, Rosenberg isn’t worried. “We’ve been competing against companies bigger than Comcast for a long time and very successfully,” he said. “It’s worth noting that despite the global supply chain issues and a drop overall in U.S. television sales, owing in part to those global supply chain issues, that Roku is still the No. 1 licensed TV OS in the U.S.” The ongoing supply chain problems are also proving to have an adverse effect on the advertising business, though Roku’s monetized video ad impressions roughly doubled year over year, and average spend among new advertisers almost doubled. “It’s not unique to Roku that there are a few advertising verticals that have slowed their spending as a result of their own supply chain issues,” said Rosenberg, pointing to auto and CPG. “But we view this as a temporary slowing down while these brands figure out what’s happening with their own supply chain. We do see it as a temporary slowdown.” Roku Launches Biggest Ever Brand Campaign Ahead of Holiday Season