On September 1, streaming device company Roku filed for an initial public offering (IPO) of up to $100 million with the U.S. Securities and Exchange Commission. Roku intends to be listed on the NASDAQ exchange under the symbol ROKU. In its SEC Form S-1, Roku said it pioneered streaming to TV, connecting users with streaming content on-demand from services like Netflix, Amazon Prime and Hulu. The company currently earns revenue from the sale of its streaming players and platform revenue from advertising and subscription revenue share.

As of June 30, 2017, the company had 15.1 million active accounts, and in the six months ended June 30, 2017, Roku users had streamed 6.7 billion hours from the Roku platform. The company wants to leverage that popularity to raise money for working capital, research and development, sales and marketing, and capital expenditures. Roku may also use the proceeds for acquisitions of or investments in technology or businesses that complement their offerings, though there are currently no such deals on the table.

‘TV streaming’s disruptive content distribution model is shifting billions of dollars of economic value,’ Roku said in its S-1 filing. ‘Roku is capitalizing on this large economic opportunity as a leading TV streaming platform for users, content publishers and advertisers.’

Using a Roku device, consumers connect their TVs to Roku, giving them access to more than 500,000 movies and TV episodes; live sports, music and news; and content providers like CBS All Access, Sling TV and Netflix. Some channels including CBS News, Crackle and The CW are ad-supported. Others like HBO Now, Hulu and Netflix are subscription channels. Roku also offers channels like DirecTV Now, Sling TV, and Sony PlayStation Vue which offer skinny bundles that replace cable TV with live and on-demand programming. According to Roku, they operate the number one TV streaming platform in terms of hours streamed.

‘Content publishers and advertisers win with Roku because our large and growing user base simplifies their access to the fragmented and complex over the top, or OTT, market and we provide them with direct to consumer engagement and monetization opportunities. We provide our content publishers with access to the most engaged OTT audience, as measured by average hours streamed, and the ability to monetize their content with advertising, subscription or transactional business models,’ Roku said.

‘Furthermore, as a pure play, neutral TV streaming platform, we are better able to serve content publishers compared to other platforms that have diversified business operations and competitive content offerings,’ Roku added. ‘Advertisers on our platform can reach our desirable OTT audience with ads that are more relevant, interactive and measurable than advertising delivered on traditional linear TV. As traditional TV audiences shrink, OTT audiences have become increasingly important to advertisers who must continue to reach large audiences. Our growth in active accounts and hours streamed has attracted more content publishers and advertisers to our TV streaming platform, creating a better user experience, which in turn attracts more users.’

Roku provided the following financial highlights in its SEC filing:

• Revenue for the first six months of 2017: $199.7 million, a 23 percent increase over the same period in 2016.
• Revenue for fiscal 2016 was $398.6 million, a 25 percent increase over fiscal 2015.
• For the six months ended June 30, 2017, player revenue was 59 percent of total revenue, a 2 percent decline. Platform revenue represented 41 percent of total revenue, a 91 percent increase from the period ended July 2, 2016.
• For fiscal 2016, player revenue was 74 percent of total revenue, a 9 percent increase. Platform revenue was 26 percent of total revenue, a 110 percent increase over fiscal 2015.
• In fiscal 2016, advertising revenue represented 63 percent of total platform revenue. For the six months ended June 30, 2017, advertising revenue represented 67 percent of total platform revenue.
• For the six months ended June 30, 2017, net loss was $(24.2) million.
• In fiscal 2016, net loss was $(42.8) million.

As over-the-top (OTT) TV increases in popularity, Roku believes it will have a greater opportunity to reach more consumers to provide value and improve their TV viewing experience, to benefit content publishers through direct-to-consumer distribution and monetization opportunities, and to offer advertisers access to a hard-to-reach audience.

Despite the market opportunity, Roku outlines a number of risk factors in its S-1, including operating losses, a highly competitive market, monetization challenges, an evolving industry, the supply of ad inventory, potential changes in viewing habits and content acquisition.

Last week Roku had more news to share. On Wednesday, the company announced The Roku Channel, a new streaming channel for Roku players and Roku TVs. The new channel features a rotating collection of hundreds of Hollywood movies, all free. The channel is already available on some Roku devices, and will be rolled out to current generation devices ‘in the coming weeks.’ Content on the channel will be ad-supported, but Roku said it will be about half the advertising per programming hour than viewers will see on ad-supported linear TV.

Insider Take:

It is hard to predict how an IPO will go over, particularly with a few notable busts lately, but Roku has been growing and can be expected to grow in the short-term. The keys to its success will be in continuing to partner with popular OTT services and channels, providing a palatable ad experience for consumers, keeping its expenses reasonable so the company can eventually turn a profit, and adapting quickly – and driving change – in an evolving industry.

Personally, I love Roku. I have both a Roku device and Amazon Fire Stick. They each offer a different experience, but both are about the same price and easy to use. I find Roku a little easier to navigate, but both tools offer the access I want to the services to which I subscribe. I have not used any of the free offerings on Roku yet, so I am eager to check out The Roku Channel.

While Roku does not have a subscription component itself, it works with so many subscription providers (e.g., Amazon Prime, PlayStation Vue, HBO Now) that this IPO could potentially have an impact on them, because Roku will have more money to support its products and services. If the Roku experience continues to improve and Roku can offer subscription providers with more monetization opportunities, everybody wins.