Please ensure Javascript is enabled for purposes of website accessibility

Roku's Not-So-Secret Ingredient Can Make You Rich

By Rick Munarriz - Jun 18, 2021 at 11:55AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Quibi content repurposed as Roku Originals is driving traffic and engagement to the popular streaming platform.

Roku (ROKU -1.05%) may have reportedly paid a pittance to acquire the content catalog of the shuttered Quibi streaming service, but it's making that deal pay off in a hurry. The debut of Roku Originals late last month -- fueled by many of the Quibi shows and chapter-sized films and documentaries -- is driving heady growth and impressive engagement to The Roku Channel. 

The Roku Channel was doing just fine on its own before Quibi's vault fell into the lap beneath its raised bidding card. The app within all Roku hubs that offers free ad-supported access to more than 190 live linear channels along with a library that now tops 40,000 movies and television programs was already was already reaching an estimated 70 million people in the U.S. through the first three months of this year. With Quibi shows now among the most viewed content on The Roku Channel in just the first two weeks since launching on the hub this is shaping up to be one of the best content grabs in streaming history. 

Two people on a couch watching something scary on TV.

Image source: Getty Images.

Out of the ashes of a failed premium service

Quibi never stood a chance when it launched last year. It had celebrity-anchored talent, respected executives, and a marketing budget big enough to spring for Super Bowl ads. However, it was doomed the moment it limited distributions to mobile devices, compounded by its late arrival as a premium service. 

Now we're seeing what happens when you take content that never found an audience with the platform that has proven to be an audience magnet. Roku accounts have grown by 35% to 53.6 million over the past year.

If the 53.6 million active accounts seems like less than the 70 million people watching The Roku Channel, keep in mind that each Roku account often serves an entire family. Many Roku users have probably never clicked into The Roku Channel, and you can't blame them with thousands of other apps available on the platform. However, Roku Originals is getting folks interested in Roku's namesake channel for free ad-supported streaming content. In the first two weeks following the Roku Originals launch on May 20 The Roku Channel has hit a record number of active accounts checking it out. The 10 most-watched shows on The Roku Channel in those first two weeks were all Roku Originals content. 

It's not just a curiosity click or an errant tap, either. More than a third of The Roku Channel users have streamed a Roku Originals show, and the average user is streaming over nine episodes in those two weeks. 

It gets better. Roku only added roughly 40% of the Quibi catalog when Roku Originals launched last month. It has another 45 shows that it will release throughout the year. It has also already approved a second season for one of the shows, the Kevin Hart-fueled Die Hart. Roku has also been picking up the pace to secure rights on content for The Roku Channel. 

Will we get to the point where so much original content makes it less appealing to the major streaming services driving traffic and ad revenue Roku's way? We've already seen Roku start to play hardball in negotiations with a few prolific services. The bigger takeaway here is that Roku is becoming a legit media stock with an open runway to increase ad revenue per user, engagement, and its active accounts base. Quibi's loss was Roku's gain, and the future has never been brighter for the platform that survived. 

Rick Munarriz owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Roku Stock Quote
Roku
ROKU
$77.60 (-1.05%) $0.82

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
394%
 
S&P 500 Returns
127%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/18/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.