COVID-19 Speeds 'Shift to Streaming,' Roku Chief Says; Stock Down Amid Ad Impact

COVID-19 is “accelerating the shift to streaming,” said Roku CEO Anthony Wood on a Thursday Q1 call. The pandemic is slowing growth of its video advertising business, he said. The streaming device maker cited Nielsen data saying prime-time linear viewing March 16-April 19 among adults 18-34 was down 18% year on year, and that nearly half of TV viewing was streamed. Subscription VOD trials and transactional VOD purchases were up, but the ad business has seen “higher than normal cancellations” as overall advertising budgets were cut; part of that has moved to Roku from traditional TV budgets, it said. Roku believes its ad business will deliver “substantial” revenue growth, “albeit at a slower pace and lower gross profit” than projected. Wedbush estimates the ad drop-off at 20%, and Roku is “almost certainly gaining market share of overall digital advertising,” analyst Michael Pachter wrote investors Friday. Though he's “warming” to Roku’s story -- “streaming has a more favorable and flexible price point than cable” -- he sees the average revenue the company generates per user declining. Roku has 45%, 40 million, of U.S. connected TV homes, estimated Needham's Laura Martin. The stock closed down 7.9% Friday at $126.66.