There’s a common saying that an investor should understand his or her investment. Such knowledge goes beyond looking at charts and financial statements and instead, engaging the products or services. Honestly, I wish I did that with Roku (NASDAQ:ROKU). I would have been far more bullish far earlier on Roku stock.
If you’ve followed my work over the years, you’d know that I’ve talked extensively about the streaming revolution. Generally, I’ve been optimistic about companies like Netflix (NASDAQ:NFLX) and Disney (NYSE:DIS) because of their exposure to an increasingly relevant industry. After all, content consumers are cutting the cord, not putting it back together.
However, not everybody has jumped on the streaming bandwagon. That once included me. For years, I was in a long-term relationship with a traditional satellite TV provider. Paying upwards of $100 a month, I had access to hundreds of channels. Yet over time, I recognized that the dollar-for-value proposition no longer made sense.
Long story short, I made the decision to walk away. I cut the cord and found a new flame with ROKU. Suddenly, esoteric terms like over-the-top (OTT) equipment or on-demand viewing made sense. Don’t get me wrong. They made sense before, but on paper. By actually purchasing an OTT device, though, I intrinsically understood the power and potential of Roku stock.
It may sound melodramatic, but ROKU made TV great again. Here are three reasons why:
On-Demand Truly Means on Demand
After I set up my ROKU and journeyed into the world of streaming, I realized something: once you go OTT, you’ll never see regular TV.
It’s a remarkably simple concept, but one that drives the ROKU stock price over the long haul. During my corded days, I would occasionally miss my favorite TV shows, which would drive me crazy. Unless that program was on TNT – which repeats programming by the hour in perpetuity – I was screwed.
Well, that’s a bit of a harsh term. Still, I would argue that the linear scheduling of traditional TV is very inconvenient in the modern era.
With OTT, that nonsense stops right away. If you choose not to watch a program live, you can always watch it at a time of your choosing. And with that, I finally understood – truly understood – the concept of binge-watching. This, of course, is a net positive for the ROKU stock price.
More importantly from an advertising perspective, the commercials are short relative to TV broadcasts. Because of this, I find myself actually watching them as opposed to running to the kitchen, making a hoagie, washing the dishes, and then taking a bathroom break, only to return to more commercials.
Roku Stock Cutting Across Demos
Naturally, the OTT market appeals to millennials and the emerging Generation Z. Typically more tech-savvy than preceding generations, streaming is almost instinctive to them.
But for the next chapter of ROKU, the streaming equipment maker has an opportunity to convert the older demographic. Actually, that’s what we’re already witnessing. According to a PwC study released earlier this year, U.S. corded households dropped 10 percentage points in just two years. Now, only two-thirds of households have a traditional TV subscription service.
Moreover, PwC found that 28% of the 50 years and older crowd don’t have traditional TV. Additionally, 61% of this demographic receive TV content from online sources.
These statistics will only improve for OTT providers and will conversely worsen for traditional TV providers. Primarily, I remained tethered for so long for two reasons: laziness and a sense of loyalty. In terms of the latter, I wasn’t alone. A sizable 19% of traditional TV subs describe themselves as being in a “committed relationship” with their provider.
Unfortunately, it’s also a bad one, and particularly painful for the wallet. And like many sour relationships, the negatively affected parties just don’t know better. But once the older demo realizes the beautiful simplicity of OTT, it’s over. With ROKU, the grass really is greener on the other side.
The Bottom Line on Roku Stock
One of the things I really hated about the cord was my provider sneaking in some BS charges. Little by little, I noticed new channels added to my subscription without my asking for it. Subsequently, my monthly bill inched higher and higher, like the metaphorical frog in steadily boiling water.
And with my subscription, I noticed that most of the channels I received were junk, or at least junk to me. For instance, I was essentially paying for Lifetime, billed as a channel for women. But the shows there are so sappy that I know many women who don’t watch that nonsense.
Still, it was part of my “package” so I couldn’t get rid of it. The best I could do was close my eyes and pretend that it didn’t exist.
On the other hand, ROKU takes an intuitive and fair approach: I select what channels I want. Many of them are free. However, if I choose to pay for premium content, I alone make that choice.
After suffering from Stockholm syndrome for years from my TV provider, even the little changes make a world of difference. To paraphrase the great and incomparable Dr. Martin Luther King, Jr., I’m free at last!
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.
