🎧 Can Roku Stem The Rout?

Hit for 3M, Peloton's woes continue.


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🎧 Roku: Stemming The Rout?

Streaming platform Roku Inc. (ROKU) and Google have called a truce. The company signed a multi-year agreement with Google to keep YouTube and YouTube TV on its streaming platform. Will this be the trigger for a much-needed reversal in the company’s share price? (Tweet This)

BigTech. Bigger Tantrums.

Roku asks for a percentage of advertising inventory to sell to its customers in each carriage deal it negotiates. In early 2018, Roku signed an agreement with Google to make YouTube TV available on select devices. Priced at $35/month, the service gave users access to live TV from ~50 networks.

No sooner than the announcement was made did the relationship go downhill. The issue? How advertising revenue would be split between the two parties. Roku started claiming Google was using its dominant market power to force unfavorable terms on a competitor.

Roku charged that Google demanded access to search data from Roku’s customers as a condition for allowing YouTube TV on Roku’s devices. It also asked for prioritized search results for YouTube videos in Roku’s search feature. Roku ruefully agreed to Google’s demands since having YouTube on its platform was crucial for the company.

In return, Roku asked Google not to demand any additional data, to which Google remained non-committal. Instead, they reached an impasse over the terms when the two companies sat across the table to renegotiate the deal.

While the negotiations were ongoing, Google allowed people to access YouTube TV directly from the main YouTube app. Roku made its disapproval known, labeling Google an “unchecked monopoly” and cited Google’s decision as an example of “predatory business practices.” Google balked at these accusations and termed them “baseless and unproductive.”

Appealing To The Higher Authority!

The stalemate went to such an extent that Google announced the removal of YouTube and YouTube TV from Roku’s platforms, starting December 9. It meant that any new user who bought a Roku device post that date would not be able to install YouTube apps while existing customers could continue using the apps.

Enter the Congress. The legislative body was already attempting to rein in BigTech through antitrust legislation. Roku found support from Democrat senators Amy Klobuchar and David Cicilline. Google also found itself in a soup over its earlier denial of asking for additional data from Roku.

With the December 9 deadline nearing, it was best suited in the interest of both companies to wave the white flag at each other. True to the script, last week, Roku announced signing a multi-year agreement with Google to keep YouTube and YouTube TV on its streaming platform so that its 56.4M active Roku accounts can continue watching these channels without any disruptions.

The terms of the agreement haven’t been revealed. This is not the first time the aggregator of digital videos was locked in a tussle with larger companies. Last year, Roku was in an imbroglio with Comcast’s NBC and AT&T’s WarnerMedia to carry their Peacock and HBO Max streaming applications.

Roku accused NBC and WarnerMedia of being stuck in a legacy television mindset instead of growing together with the company. Eventually, Roku managed to get both companies on board in September and December last year.

The deal comes as a relief for Roku as a YouTube blackout would have meant significant customer defections. It would also have benefited Roku’s competitors like Amazon Fire TV and Apple TV, which carry YouTube on their respective platforms.

Roku’s CEO is the first to admit that the company’s stock is “notoriously volatile.” True to that sentiment, the stock, which jumped 18% on Wednesday, slid over 8% the next day and another 2.5% on Friday. As bad blood brewed between Roku and Google, the former’s shares swooned, halving from their 52-week high of $490.

Will this deal restore some stability to the stock price, or is it a brief interlude to its vagaries? A Google search may not be able to answer that question!

Market Reaction
ROKU ended at $229.25, down 2.48%. Shares are down 28% this year.

Company Snapshot 📈

ROKU $229.25 -5.84 (2.48%)

Analyst Ratings (29 Analysts) BUY 79%  HOLD 14%  SELL 7%


Newsworthy 📰

Normalize: Azek CEO expects raw material costs to come back down, helping fuel profit growth (AZEK +1.97%)

Penalty: 3M hit with $22.5M verdict in latest US military earplug trial (MMM -0.05%)

Damage: Peloton selloff continues as Sex and the City reboot adds to its image issues (PTON -5.38%)


Later Today 🕒

  • Claros Mortgage Trust Earnings (CMTG)
  • Casa Systems Inc. Earnings (CASA)

Today’s Market Terminology: Gross Margin

Gross margin of a company is the profitability when comparing the company’s revenue to the costs involved in production


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