Roku Veers Into Programming With Launch of Ad-Supported Movie Channel

The Roku Channel_9.6.17
Courtesy of Roku

Streaming device maker Roku launched a new channel on its platform Wednesday that’s all about free movies — and Roku’s desire to grow its ad business ahead of its IPO.

“The Roku Channel” promises access to several hundred films, including “The Karate Kid” and “Legally Blonde,” from major Hollywood studios like Lionsgate, Metro-Goldwyn-Mayer, Sony Pictures and Warner Brothers. Videos will be accompanied by advertising, and Roku CMO Matt Anderson said that the ad load will be about half of that of traditional TV.

“There is a huge demand for free content,” he told Variety. “Our customers are really interested in streaming free entertainment.”

In addition to contributions from studios, The Roku Channel will also feature videos from American Classics, Fandor, FilmRise, Nosey, OVGuide, Popcornflix, Vidmark, and YuYu — publishers that all have their own channels on Roku as well.

The Roku Channel is not the first such ad-supported channel on Roku devices, and consumers are likely to stumble across the same titles elsewhere as well. However, it’s the first time that Roku actually licenses movies from Hollywood studios on this scale, and as such also a good indicator for a shift in the power dynamics in streaming media — a shift towards the platform providers, that is.

For Roku, programming its own channel is a bit of a departure from the way the company used to do business. Roku has long had the reputation of being a kind of Switzerland of the streaming media world, with a singular focus on hardware while other device makers, including Apple and Google, also operate their own content services. Previous to this launch, Roku was only operating one other channel with 4K videos as a way to showcase the capabilities of its 4K devices.

Roku’s changed approach can be explained with the company’s growing advertising business, and the desire to sell more of its own ads against videos on its platform. When the company filed for IPO late last week, it revealed that ads and other licensing fees now make up for 41 percent of its revenue.

At the same time, Roku hasn’t been able to monetize some of its most-watched channels at all. For instance, Google runs its own ads against YouTube, the most popular free channel on Roku, and doesn’t share any of the resulting revenue with the company. Other publishers often do use Roku’s advertising platform, but may also opt to sell some of their inventory themselves.

So why would a publisher license their videos to Roku as opposed to just running them on their own channels? Anderson said that The Roku Channel would help consumers find content from publishers who might otherwise get lost in a catalog of over 5,000 channels. Aggregating this content in one channel should ultimately lift all boats, he argued.

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