Roku and Best Buy Team Up to Sell Your Attention
Best Buy-exclusive Roku televisions let advertisers target you better
Back in December, Disney+ released its new ad-supported tier. Now, reports are showing that since then, 36% of new subscribers have been choosing this new option, compared to 19% and 21% for Netflix and HBO Max’s ad-tiers, respectively.
We’ve covered streamers and their newfound love for ads a few times now, and it seems like we’ll have to keep covering it as services continue to fish for more subs at a time when people are becoming increasingly price-conscious.
In this issue:
Roku needs to pivot
The new TVs have decent specs
But advertising is what this deal’s about
Roku’s market is changing
Back in January, Roku got a log of buzz at CES by announcing Roku-branded smart TVs. Unlike streaming boxes and sticks, the company’s smart TV strategy focused on licensing Roku OS to TV manufacturers. Now, Roku and Best Buy have announced an exclusive distribution deal. But why risk alienating TV makers, retailers, and consumers?
Research from Parks & Associates may help shed some light on Roku’s decision. According to their research, 64% of connected households in the US now have a smart TV. That’s up from 38% in 2015. Fewer people need an add-on device, which means Roku’s core business is drying up.
Now consider who uses Roku OS. Most are third-tier zombie brands like Magnavox and Westinghouse. TCL and Hisense, on the other hand, generate most of the Roku smart TV sales volume, putting the two companies in a strong position when negotiating with Roku. All they have to do is flip to Google TV, and Roku loses a lot of business.
Parks also reported that households have an average of 16 connected devices. Compatibility and control are important to consumers’ purchasing decisions. As the one connected device in most households, the TV becomes the defacto smart home hub. That’s one reason Roku entered the smart home market last year.
Launching Roku-branded TVs reduces the company’s risk, gives them more control over the smart home experience, and makes up for lost revenue from their streaming device products.
Roku-branded TVs have the right specs for Best Buy customers
Roku has a respectable lineup that will meet most consumers’ needs. The two product lines, Roku Select and Roku Plus, share features like Dolby Audio, built-in WiFi, and Roku’s voice remote.
Roku Select products come in an HD variant (24”, 32”, and 40”) and a 4K variant (43 “, 50”, 55 “, 65”, and 75”). The 4K version includes HDR10+, upgraded WiFi 5 wireless, additional remote control features, and an Ethernet port.
Roku Plus models are all 4K and use 55”, 65 “, or 75” QLED panels with local dimming. They support Dolby Vision and Atmos and an upgraded remote for hands-free voice control. Connectivity also gets an upgrade with WiFi 6, Ethernet, and Bluetooth.
Roku and Best Buy share customer data
These announcements matter to a company desperate to transition from manufacturing to advertising and media services. Roku has over 70 million active users worldwide who stream over 87 billion hours of content a year.
That’s a lot of people staring at the Roku interface — a perfect opportunity for selling their attention.
Advertising’s driving the Best Buy deal. Roku’s press release explained that 82% of US advertisers plan to spend more on retail media networks. Best Buy’s media network sells ad space on its website, mobile apps, social media and in-store. Linked to the retailer’s customer data, these ads drive sales.
By sharing data, Roku and Best Buy expect to make ads on Roku “more relevant,” which means more profitable for the new partners.
Our takeaway: Roku’s decision could blow up in its face
Selling our attention is nothing new in a TV business that uses ad sales to drive down prices. Advertising is also the cornerstone of the streaming business. And, of course, advertising has always gone hand-in-hand with retail.
I question whether Roku’s decision won’t come back to bite them as other retailers react to the deal. More than half of Walmart’s in-store smart TV assortment are TCL, Hisense, and other Roku-powered brands. A word from Walmart’s buyers could convince TCL and Hisense to switch to Google TV.
I don’t think the Roku brand and Best Buy’s market share are enough to cover that kind of loss. If I’m right, Roku go the way of TiVo as its unique product becomes just another feature in other companies’ products.
Give us your thoughts
Are you interested in a Roku-branded TV?
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