How Roku Makes Money

Roku's streaming platform generates the majority of revenue and profits

Roku Inc. (ROKU) offers a TV streaming platform and streaming devices. The platform acts as a TV streaming ecosystem: it enables consumers to seamlessly view thousands of channels on a wide range of streaming services, and it enables content providers and advertisers to reach consumer audiences in markets around the globe. Roku generates revenue primarily through the sale of digital advertising and content distribution services. It also sells its own Roku-branded TV and various streaming devices, such as players, streaming sticks, and smart soundbars.

Roku operates within the highly competitive TV streaming industry. Competitors include: legacy pay-TV service operators, such as Comcast Corp. (CMCSA) and AT&T Inc. (T); companies that offer TV streaming devices, such as Inc. (AMZN), Apple Inc. (AAPL), and Alphabet Inc.'s (GOOGL) Google; TV brands offering their own TV streaming solutions; makers of video game consoles; mobile streaming platforms, such as Twitter Inc.'s (TWTR) Periscope; and companies offering other types of advertising platforms, like Meta Plaftorm Inc.'s (META) Facebook and Snap Inc. (SNAP).

Key Takeaways

  • Roku provides a platform for TV streaming and sells streaming devices.
  • The fast-growing Platform segment generates the most revenue and profits.
  • Roku's active accounts rose to 60.1 million in the fourth quarter.
  • Roku has decided to remove the app for Russia Today from its Roku Channel Store in Europe amid Russia's invasion of Ukraine.

Roku's Financials

Roku announced in mid-February financial results for Q4 of its 2021 fiscal year (FY), the three-month period ended Dec. 31, 2021. The company posted a quarterly net income of $23.7 million, down 64.8% compared to the year-ago quarter. Net revenue for the quarter grew 33.2% year over year (YOY) to $865.3 million. Gross profit, which the company uses as a profit metric for its individual business segments, rose 24.3% YOY to $379.6 million. Roku's operating expenses rose 49.1% YOY, much faster than revenue growth, thus weighing on net income for the quarter.

In its letter to shareholders for the fourth quarter, Roku said that global audiences, content, and advertisers continued to shift from traditional to streaming TV. The company believes that this shift to streaming is still in the early stages and that eventually all TV and TV advertising will be streamed. The company highlighted that its active accounts increased by 8.9 million compared to Q4 FY 2020, bringing total active accounts to 60.1 million.

Roku's Business Segments

Roku operates two main business segments: the Platform segment and the Player segment. It provides a breakdown of net revenue and gross profits for each of these two segments. The gross loss for the Player segment was excluded from the percentage-share calculation for total gross profit reported below and in the pie chart above.


The Platform segment generates revenue through the following sources: the sale of digital advertising and related services; content distribution services, including subscription and transaction revenue shares, media and entertainment promotional spending, premium subscriptions for customers wanting ad-free content, and the sale of branded channel buttons on the company's remote controls; and licensing arrangements with service operators and TV brands.

The segment's gross profit rose 41.5% YOY to $425.6 million in Q4 FY 2021. Net revenue was $703.6 million, up 49.3% compared to the same three-month period a year ago. The Platform segment generates 100% of the company's gross profit and 81% of net revenue.


The Player segment generates revenue from the sale of streaming players and audio products. It includes sales of hardware, embedded software, and upgrades. Roku sells the majority of its players and audio products to retail distributors in the U.S., including brick-and-mortar and online retailers, as well as through its own website.

The segment reported a gross loss of $45.9 million in Q4 FY 2021, a deterioration from the gross profit of $4.6 million in the year-ago quarter. Net revenue for the segment fell 9.5% YOY to $161.7 million in the fourth quarter, comprising about 19% of the company's total net revenue.

Roku's Recent Developments

In late February 2022, Roku made the decision to remove the app for Russia Today, a Russian state television network, from its Roku Channel Store in Europe. Roku is among a number of technology companies, including Facebook parent Meta Platforms, that are restricting access to Russian state media outlets amid Russia's recent invasion of Ukraine.

Article Sources
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  1. Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 16.

  2. Roku Inc. "Company."

  3. Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Pages 10 & 14.

  4. Roku Inc. "Form 8-K dated Feb. 17, 2022," Page 9.

  5. Roku Inc. "4Q21 Shareholder Letter," Pages 1 and 2.

  6. Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Pages 49, 54, and 55.

  7. Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Page 49.

  8. Roku Inc. "Form 10-K for the fiscal year ended December 31, 2021," Pages 49 and 75.

  9. Reuters. "Roku is removing RT from the Roku Channel Store in Europe - source."

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