Streaming TV isn’t growing like investors hoped.
Shares of TV device and streaming company Roku (ROKU -10.47%) fell as much as 10.1% in trading on Wednesday as the market sold off and investors started to question the future of second-tier streaming companies. The stock is down 9.6% as of 3 p.m. EDT.
Streaming slowdown?
The catalyst today was Comcast’s earnings report, which showed a loss of 500,000 subscribers at Peacock to 33 million paid subscribers. That’s especially shocking when you consider Peacock is the home of the Olympics, which starts this week.
Roku is impacted because it is both a streamer and a reseller of other streaming services. If consumers aren’t adding streaming outside of Netflix and Disney, which are the two market leaders, will there be much growth for Roku?
According to Nielsen data for June 2024, Roku’s U.S. screen-time market share is well behind Netflix (8.4%) and Disney (5% for Disney+ and Hulu). Roku’s 1.5% share is closer to Peacock’s 1.2% share.
Winner-take-all markets don’t play for second place
Market share and subscriber momentum are important today because streaming will likely be a market where the top one or two companies take all of the profits, just like we see in social media. Netflix and Disney have a big leg up, and it looks like the second tier of streamers is struggling as a result.
Not only is that bad for the Roku Channel, but it would give Roku less power in the market if it doesn’t have multiple streaming services that all need distribution to be profitable. Negotiating terms with the top one or two players will be less lucrative, and that’s why investors are selling Roku today.
Travis Hoium has positions in Walt Disney. The Motley Fool has positions in and recommends Netflix, Roku, and Walt Disney. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.
