Samsung is the biggest smart TV manufacturer in the world, but Roku (ROKU 0.65%) is working to change that. As of the end of 2020, Samsung had nearly twice the global connected-TV device install base as Roku, according to estimates from Strategy Analytics, thanks to its global scale and the popularity of its television sets.
But Roku's international expansion is still in its early days. When looking at just the United States, Roku's the market leader, according to Strategy Analytics. And it's not unrealistic that Roku can quickly catch up to Samsung as it enters new markets.
Winning where it chooses to play
Roku has made tremendous progress in growing its share of the connected-TV market over the last few years. As stand-alone connected-TV devices and smart TVs started gaining traction in early 2016, Roku was an early winner in the United States. What's more, it's been able to grow faster than Samsung and all other competitors to continue growing its market share since.
Roku had a 15.2% share of the U.S. connected-TV device install base as of June 2019. That number was nearly 20% by the end of 2020.
Roku's management says its smart TVs accounted for 38% of all smart TVs sold in the U.S. last year. That's up from its estimates of about 33% in 2019 and 25% in 2018.
Roku's also showing good progress in Canada, where it says it has a 31% market share and was the No. 1 smart TV operating system in 2020. The company is slowly and deliberately expanding to new markets, too. Last year, it entered Brazil, first with a smart TV partner and then with a stand-alone streaming device. It also sells devices in Mexico, the U.K., Ireland, France, and several Latin American markets.
By comparison, Samsung is a global presence. It's a massive consumer electronics brand with a strong reputation for quality devices. Samsung has been the global leader in LCD TV sales for the last 15 years or so. So, Roku and its manufacturing partners have their work cut out for them.
Following the playbook
As Roku invests in its international expansion, it's following a clear formula that's enabled it to expand its market share in the United States and increase its user monetization.
Roku has developed something of a playbook for growing its share of the markets it enters. The key components are partnerships with television manufacturers, retailers, and content owners. All three work together to improve consumer choice and availability, which spurs sales for Roku.
"We are seeing strong early evidence that our strengths and differentiators translate internationally," management wrote in its fourth-quarter letter to shareholders.
In fact, Roku's success in the U.S. could enable it to gain ground more quickly in new markets. The big global streaming services are primarily based in the United States. So, Roku's typically entering new markets with strong media partnerships for international content. From that base, it just needs a few key local partnerships to ensure audiences can watch everything they want on Roku devices.
Those pre-existing partnerships with media companies also give manufacturers and retailers more confidence in Roku's platform and brand, which makes it easier for Roku to attract partners in those areas.
Catching up to Samsung
Roku's international presence is minuscule compared to the behemoth that is Samsung. The fact that Roku's active devices total even half of Samsung's is actually quite impressive considering Samsung's brand and historical dominance of smart TVs.
But Roku's investing heavily in its international expansion. It presents a significant long-term opportunity for the company and its investors, but it'll take time. Management says it's focused on building a user base before increasing engagement in new markets, and it won't even think about ways to maximize user monetization until engagement is where it wants.
Going forward, there'll be more pressure on Roku to break out its revenue per user in the U.S. from the rest of the world. That'll give investors a better idea of the potential still to come for Roku in international markets. Roku may give investors that visibility this year, as CFO Steve Louden said it's working on breaking it out. So, as they say in the TV industry, stay tuned.