The dust is still settling on Roku's (ROKU -1.01%) IPO last week, and the company is trying to keep the momentum going this week by releasing five new Roku streaming devices and an update to its devices' operating system.
Some of the upgrades include a new, faster processor, a voice-controlled remote, and improved wireless capabilities, all of which are aimed at keeping pace with Apple (AAPL -0.24%) TV and Amazon.com's (AMZN -2.90%) Fire TV. Let's take a look at what the new devices offer and why they matter to Roku.
Image source: Roku.
A Roku for every budget
Roku has always been good at offering a wide variety of streaming devices at varying price points, and the latest lineup follows that same idea. Gone from the company's lineup are the Roku Premiere and Roku Premiere+, and here's what remains (along with what's been updated).
|
Device |
Price |
Key Features |
|---|---|---|
|
Roku Express |
$29.99 |
One of Roku's smallest devices that is similar to its older predecessor, but with a new quad-core chip that's five times faster than before. |
|
Roku Express+ |
$39.99 |
Nearly identical to the Express, but the device comes with A/V composite ports for connecting to older television sets. The device is available exclusively at Wal-Mart. |
|
Roku Streaming Stick |
$49.99 |
The Stick has an upgraded quad-core processor and new wireless 802.11 AC dual-band MIMO compatibility (a newer wireless standard). The device also comes with a voice remote that includes TV power and volume buttons. |
|
Roku Streaming Stick+ |
$69.99 |
This device adds 4K video streaming capabilities, 4K HDR support (for better color resolution) and up to 60 frames per second for streaming. It also includes four times the wireless range as last year's streaming stick. |
|
Roku Ultra |
$99.99 |
The new Ultra has 4K, 4K HDR support, an improved wireless signal, ethernet port, and microSD slot. It also has the voice-controlled remote, a headphone jack, remote finder, and a lower price than last year's model. |
Source: Roku.
Why these devices matter
First and foremost, it was important for Roku to refresh its device lineup because Apple and Amazon just made some improvements of their own to their streaming devices.
The latest Apple TV debuted last month and now offers 4K and HDR support, comes with 32GB or 64GB internal storage and keeps its previous features like an ethernet port and voice-controlled remote. Apple taps the high-end streaming device market with Apple TV's price tag starting at $179.
Image source: Apple.
Amazon's new Fire TV, which replaced its previous device, also sports 4K and HDR capabilities and voice-controlled remote, but costs just $70. That's an aggressive pricing approach and makes it the biggest competitor to Roku's Streaming Stick+.
Roku made 59% of its revenue from the sales of its streaming devices in the first six months of 2017, with the remaining revenue coming from its platform segment (more on that in a moment). Device revenue declined by 2% in the first six months of this year, according to the company's pre-IPO SEC filings.
The slightly declining device revenue may not be a huge issue of concern at the moment as Roku flooded the market with lower-end devices in order to boost its market share in the streaming device space. The company is focusing more of its attention on its platform revenue, which is comprised mainly of ads that are displayed on the homescreen, and from a cut of subscriptions that are are signed up for on Roku's devices.
Platform revenue increased 91% of Roku's top line in the first six months of this year, compared to a year ago, and now accounts for 41% of all revenue.
Investors should both be optimistic about the platform revenue growth and be closely watching for strong sales of Roku's new devices. The company managed to increase device sales by 37% in the first six months of 2017 and Roku will need to continue seeing solid device sales in order to keep platform revenue growing.
The average selling price (ASP) of these devices are falling, but if Roku offsets that declining revenue with more platform revenue (which it has been doing so far) then there won't be a problem.
In short, the release of the new devices should help spur more sales for Roku, but investors shouldn't focus on the dollar amount of those sales. Instead, focus on whether or not unit sales are growing, and then look to see if platform revenue is growing too. If both of those are happening then you'll know the new devices are a success.
