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Why Roku Stock Was Up Today

By Jon Quast - Jun 18, 2021 at 1:44PM

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Management's shiny new flywheel is starting to spin.

What happened

Shares of streaming-TV platform Roku (ROKU -6.78%) were up on Friday after the company announced that its new original-content strategy appears to be paying off. This is good news considering the time and money the company is investing into this pursuit. As a result, Roku stock was up around 4% as of noon EDT today. 

So what

In January, Roku acquired video content from failed start-up Quibi. Terms of the deal weren't disclosed, though sources for The Wall Street Journal said the company paid less than $100 million. Roku later rebranded this Quibi content as Roku Originals, launching them as free ad-supported content on The Roku Channel in May. 

A family watches TV together while sitting on a couch.

Image source: Getty Images.

Today, Roku announced that these Roku Originals are smashing records and expectations. During a two-week span from May 20 to June 3, Roku Originals had more unique users streaming content than anything it's ever had before. Moreover, the top 10 programs on the channel were all Roku Originals. 

Now what

Management believes Roku Originals will have a flywheel effect for the business. The content could drive more user engagement, boosting ad revenue and providing more funds to create more engaging content. As of the first quarter of 2021, there were 70 million active Roku accounts. And given that these were watching content on The Roku Channel like never before, it appears management's strategy is already paying off.

Shareholders should keep in mind that platform-segment revenue made up 81% of Roku's business as of the first quarter, and ad revenue on The Roku Channel is a big part of that. Success with this new strategy, therefore, bodes well for this media company's long-term outlook. 

Jon Quast owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool has a disclosure policy.

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