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The Roku Channel Launches on Amazon Fire TV

By Jon Quast – Updated Oct 8, 2020 at 5:51PM

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The company seeks to increase its viewership with expanded distribution.

Streaming-video platform Roku (ROKU -4.02%) is making The Roku Channel available to users of Amazon Fire TV, according to a blog post today from the company. Roku believes people want more ad-supported streaming options, which led to the creation of The Roku Channel in 2017. Now it wishes to make this video content more widely available by expanding distribution through Amazon's platform.

That's not to say The Roku Channel was lacking viewers before this. As of the second quarter of 2020, the company estimated 43 million people already had access to its namesake channel. 

The Roku Channel is displayed on a television screen.

Image source: Roku.

The collaboration between Roku and Amazon may come as a surprise to some. The two companies are regarded as competitors, and they're two of the biggest players in the streaming-video platform space. But Roku generates some of its revenue by displaying ads on The Roku Channel, so increasing viewership will help grow top-line results.

People continue turning to streaming-TV options compared with traditional linear TV. As a result, Roku stock has been a big winner in 2020, with shares up almost 70% year to date. In Q2, Roku users streamed 14.6 billion hours of video content, up from just 8.8 billion in the same quarter last year. This is partly due to more streaming per user as people sheltered at home. But it also reflects a Roku user base that grew 41% year over year.

Revenue generated from streaming is recorded under Roku's platform segment. The technology company's hardware devices are low margin, but platform revenue carried a 57% gross margin as of Q2. Given these attractive margins, it makes sense to grow platform revenue as much as possible -- in this case through expanding the distribution of The Roku Channel via Amazon.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Jon Quast owns shares of Roku. The Motley Fool owns shares of and recommends Amazon and Roku and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. The Motley Fool has a disclosure policy.

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