Roku To Offer Its Own Ad-Supported Movie Channel

Announcement comes after company announces $100M IPO September 8, 2017

LOS GATOS, CALIF.--Connected device and streaming service provider Roku Inc. this week announced it will launch The Roku Channel, a commercially supported streaming channel delivering top films and other content free to its customers. The move comes on the heels of its announcement that the company plans an initial public stock offering with a target of raising $100 million.

"They have been very successful, especially in recent years,” says Bruce Leichtman, president and principal researcher at Leichtman Research Group. "Roku is at the top of one of the fastest growing segments –the standalone connected device [segment]–and it’s a good time to capitalize on that.”

From a business point of view, Roku faces two challenges: finding ways to capture more homes and getting “deeper into homes”—in other words, connected to second and third TVs, he says.

While Leichtman says it is hard to predict exactly what impact the new streaming channel will have on the IPO, The Roku Channel will add value for non-pay TV subscribers by making it easier for them to “cobble together” free viewing via the connected device. “Roku is the No. 1 standalone streaming device in all the surveys we do, and it skews a little more towards non-subscribers than others,” says Leichtman. 

The new channel offering will require no subscription, fee or login, the company says. It will offer movies like Ali, The Karate Kid, Legally Blonde and others from various studios, including Lionsgate, Metro-Goldwyn-Mayer, Sony Pictures Entertainment and Warner Brothers. It also will help existing channel publishers, such as American Classics, Fandor, FilmRise, Nosey and Popcornflix, to increase viewership, says the Los Gatos, Calif., -based company. 

Roku expects the new channel to have about half as many ads per program hour as linear TV. The strategy of offering ad-supported content is smart for any new network seeking to get its footing, particularly when a channel must capture the attention of customers who can already choose from hundreds of others, says Leichtman. Roku is starting from “ground zero” with the channel, he says. Making it free can help to propel the channel to a position of prominence in the minds of consumers.

Roku plans to roll out the new channel in phases over the coming weeks.

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