Analyst Warns Roku’s Premium Ad Prices Could Be Impacted By Increased Competition
Roku could see lower premium ad prices due to rising competition from alternative digital media players, Pivotal Research Group securities analyst Jeffrey Wlodarczak writes in a new report sent to investors.
While the competition likely includes the likes of Amazon and TikTok, traditional cable TV and broadband providers are also a factor.
Industry estimates are that premium CTV ad inventory can be priced around the CPM (cost-per-thousand viewers) range of broadcast TV networks. Media Dynamics estimates broadcast TV CPMs for ad deals in the recently completed 2022-2023 upfront buying season averaged $47.14.
Competition for Roku, says Wlodarczak, could come from a new joint venture formed by Comcast Corp. and Charter Corp., which is based on Comcast’s nascent Flex streaming service.
“In our view, it is a no-brainer as it levers the fact they control the dominant way consumers will access the internet for the foreseeable future,” he writes in a recent note.
Additionally, he says, Roku could see some financial declines due to a “massive fee bonanza from media & entertainment companies [launching] of direct streaming platforms.”
Roku revenue splits — from monthly subscription streaming fees with services that agreed to be carried on its platform — appear to be “slowing materially,” he writes.
Wlodarczak adds that bigger media companies — such as Apple, Amazon, Google, and the Comcast/Charter venture — can drive their streaming service costs down to near zero, especially if they are bundled with other media services.
Big traditional TV and movie studios may also be a factor contributing to “less favorable Roku agreements.”
This would be similar to what traditional content providers have done in recent years with cable TV operators.
Recently, Roku warned of a “significant slowdown in TV advertising” spending.
The news pummeled the company’s stock price, which fell 23% on the news, though it has recovered somewhat.
Roku also reported its second quarter “platform” revenue — where much of its advertising revenues resides, as well as revenue from streaming apps and services — was up 26% to $673.2 million versus a year ago.