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Business Operations Business Models

How Does Roku Make Money (Business and Revenue Model)

The Roku business model

How Does Roku Make Money?
Here’s what you should know:
  • What is Roku, and how does Roku work?
  • How does Roku make money?
  • Sales From Streaming Players and Audio Products
  • Platform Revenue
  • Roku’s Subsidiaries, Acquisitions, and Exits
  • Roku’s profit and revenue
  • What is the Roku business and revenue model?
  • Roku’s funding and market cap

How does Roku make money? Here is a full, in depth, breakdown of their two (2) revenue streams and the different products and services they offer, as well as the Roku business model, their year over year revenue, and how Roku works.

What is Roku, and how does Roku work?

Roku is a manufacturer of hardware digital media players that lets users stream content on their TVs through Roku’s content distribution services.

Founded in 2002 by Anthony Wood, Roku began trading on the NASDAQ on Sep 28, 2017, under the ticker symbol “ROKU”.

Since that time, Roku now has more than 60.1 million active accounts on the platform that streamed a total of 73.2 billion hours of content in 2021.

How Roku works is: Once a customer purchases a streaming player, creates a Roku account, and activates their device; Roku is ready to use. They then can stick to Roku’s free channels on The Roku Channel, add premium subscriptions, watch live TV, and more.

Some of Roku’s competitors include Hulu, Netflix, Youtube TV, and other streaming service companies.

Roku App in Apple App Store | Roku Business Model | How Does Roku Make Money? | How Does Roku Work?
Source: Apple App Store | Roku

How does Roku make money?

According to page 6 of Roku’s 2021 Form 10-K, Roku has more than 60.1 million active accounts that streamed over 73.2 billion hours of content on its platform in 2021. So how does Roku make money off of all these active accounts streaming all this content?

Below is a breakdown of how much money Roku makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 2 ways of how Roku makes money (in 2022):

Roku has a revenue model that makes money in two (2) ways – streaming player sales and platform revenue.

#1. Sales From Streaming Players and Audio Products

Roku makes money from selling streaming players and audio products. In fact, according to page 54 of Roku’s 2021 Form 10-K, $479.66 million or 17.35% of Roku’s total revenue came from the sales of streaming players and audio products in 2021.

These products are sold, both, through their own website as well major partnering retailers such as Amazon, Best Buy, and Walmart. In which, these three (3) retailers in particular collectively accounted for 69% of Roku’s streaming player and audio product sales in 2021.

Roku Streaming Stick Price:

  • Streaming Players: $29.99 to $179.99
  • Audio Products: $129.99 to $179.99
Roku Streaming Stick Price | Roku Business Model | How Does Roku Make Money? | How Does Roku Work?
Source: Roku

Note: 17.35% of Roku’s total revenue came from the sales of streaming players and audio products in 2021.

#2. Platform Revenue

Roku makes the rest of its money from, what they call, “monetizing [Roku’s] users engagement on [Roku’s] platform through a variety of services and capabilities.”

As noted above, Roku has more than 60.1 million active accounts that streamed over 73.2 billion hours of content on their platform in 2021, which resulted in an Average Revenue Per User (ARPU) of $41.03. All of which are being monetized through the revenue streams listed in the following paragraph.

These services on Roku’s platform primarily come from digital advertising sales and content distribution. As well as selling premium subscriptions, brand sponsorships and promotions, commerce transactions, billing services, and video advertising in ad supported channels. Which, collectively, generated $2.28 billion or 82.65% of Roku’s total revenue in 2021.

What does roku cost per month? | Roku Business Model | How Does Roku Make Money? | How Does Roku Work?
Source: Roku

Unlike other streaming services such as Hulu or Netflix, Roku does not have a monthly subscription paywall; as they make their money beyond the paywall from the monetization strategies listed above.

Roku’s Subsidiaries, Acquisitions, and Exits

To date, Roku, Inc. has made a total of 5 acquisitions.

Mergers and acquisitions business model
Source: Crunchbase | Roku

Roku’s profit and revenue

In 2021, Roku reported $2.76 billion in revenue.

Note: Because Roku, Inc. is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Roku’s publicly released financial reports, including annual reports, through Roku’s investor section on their website.

What is the Roku business and revenue model?

Roku makes money through a few revenue models that they combine within their company, they are:

  • Freemium (upselling) business model
  • Transaction based business model
  • Advertising business model
  • Licensing business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

Roku’s funding and market cap

According to Roku’s Crunchbase profile, Roku has raised $208.6 million over 11 rounds and has a market cap of $13.13 billion as of April 2022.