ROKU : RESET / POSITION TRADEThe Cable Box Is a Relic of the Past
Linear TV has offered viewers thousands of channels for a seemingly low price, but users today want more modern options and a better deal. While ~86 million households in the US still pay for linear TV, its days seem to be numbered.
Disruptive innovation typically follows a pattern: it evolves slowly at first and then all at once. Since peaking in 2011, the number of US linear TV households has declined 2.1% at an annual rate. That said, according to our research, by 2025, the number of US linear TV households will be cut nearly in half, from ~86 million at the start of 2020 to ~44 million, a level last seen more than 30 years ago.
As was the case with print media, we believe ad dollars are likely to shift from linear TV to more efficient platforms like streaming, a trend that traditional media companies have recognized. For example, during the past year alone, Comcast, Fox, and Viacom have acquired three players in the ad-supported streaming space: Xumo, Tubi, and Pluto TV, respectively.
That said, connected TV platforms are becoming a threat to traditional media companies. TV operating systems like Roku, Fire TV, and Android TV motivate many, if not most, television purchases. During the next five to 10 years, if the ad market for streaming soars, as we believe it will, TV operating systems like Roku will benefit from the share shift in revenues, taking 30% of the $70 billion ad load on each of their channels.
SOURCE : Nicholas Grous, Analyst, March 09, 2021, ARK INVEST
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