teyamay eachyn zebede
Evangeline Mellon
Roku (NASDAQ: ROKU) started out as a streaming device spin-off of Netflix (NASDAQ: NFLX) in 2008. Since then, both companies have profited from the explosive growth of the streaming market. Roku is now the top streaming device brand in the U.S., while Netflix is the world's largest premium streaming video platform.
Roku and Netflix both experienced robust growth during the pandemic, which drove more people to stay at home and watch more streaming content. However, that growth spurt also set both companies up for tough year-over-year comparisons in a post-pandemic market. Rising interest rates exacerbated that pressure by driving investors away from growth stocks.
That's why Roku and Netflix now trade about 90% and 50%, respectively, below their record highs from 2021. Should investors buy either of these fallen stocks as a long-term play on the streaming media market?
In 2022 Roku generated 87% of its revenue from its platform division, which sells ads on Roku OS (and the integrated Roku Channel). The other 13% came from its devices unit, which sells streaming sticks, boxes, and smart TVs.
Roku's platform business is profitable, but its devices business isn't. It aims to subsidize the growth of its loss-leading devices with its higher-margin platform revenue, but that strategy faces two major hurdles. First, the macro headwinds have recently throttled its ad sales and reduced the gross margins of its platform business. Second, the device segment's losses have been widening as Roku grapples with higher supply chain costs. Instead of passing those costs onto its customers, Roku is absorbing them to maintain its lower prices and stay competitive in the crowded streaming device market.
Netflix is profitable for three simple reasons: It established a first-mover's advantage in the premium streaming video market in 2007, it leveraged that head start to expand its infrastructure and cut costs, and it developed a big library of first-party content that reduced its dependence on third-party content. Meanwhile, its rivals are all hastily expanding their infrastructure while clumsily pivoting from licensing-based business models to direct-to-consumer streams.
Roku and Netflix both experienced severe slowdowns in 2022. Roku's sales of ads and devices stalled out in a post-pandemic market rattled by macro headwinds, while Netflix struggled to expand as more competitors expanded into its backyard.
For 2023, analysts expect Roku's revenue to only rise 5%, and for Netflix's revenue to grow 9%. We should take those estimates with a grain of salt, but they suggest the streaming market will remain sluggish in this tough macro environment.
Yet both companies are still gaining new users. Roku's number of active accounts rose 16% to 70 million in 2022, partly driven by the rapid growth of the Roku Channel, while Netflix's paid subscribers grew 4% to 231 million in 2022.
However, Roku will likely stay unprofitable for the foreseeable future as the losses from its devices segment continue to eat the platform segment's profits. Analysts expect Netflix's earnings to rise 15% this year as its subscriber growth stabilizes, it expands its ad-supported tier, and it cracks down on shared passwords.
Netflix's high-growth days might be over, but it's still a more stable play on the secular expansion of the streaming market than Roku, which could see its margins continue to wither away as it ramps up its investments in the Roku Channel and wages a loss-leading war against formidable tech giants like Amazon, Alphabet's Google, and Apple in the saturated streaming device market. Netflix also faces competitive headwinds, but its scale, stable profit growth, and reasonable forward price-to-earnings ratio of 28 all make it a more attractive investment than Roku right now.
10 stocks we like better than Roku
When our award-winning analyst team has a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor, has tripled the market.*
From time to time when I open Netflix, there begins to be a lag in the time from when I use buttons on the remote until the TV screen responds. The app will freeze, then the screen will fast forward to where I have been trying to navigate, then freeze again, then the TV restarts.
Also, if there's any other apps installed, you might remove them. There's been a couple reports of people with YouTube problems that uninstall/restart/reinstall didn't fix until another app (YouTubeTV) was uninstalled.
If those things don't work, you might consider watching streaming over an HDMI port. Roku's software is a disaster. Nothing gets fixed. It just gets worse. So, discretion being the better part of valor (as they say), spending $20-$40 on an external device and moving on with your life might be the best option. (Others have done that.).
If you do that, then there's no reason for the tv to be connected to the internet(?). You might consider doing a settings>system>advanced>factory-reset. During the initial setup, tell it you don't have internet. It will install a basic version of the software (antenna tv works much better this way too). Never connect it to the internet. This will protect your tv from future Roku updates which tend to break tvs. You can use your tv for as long as it lasts, without Roku's software contributing to an early death. (If you're thinking you can always get back to that basic software if/when an update breaks the tv further, that may not be the case. I thought it was something embedded in the tv. But, forum user sksR said it's updated with the updates. So, eventually Roku may negatively affect that baseline functionality too. From my perspective, the sooner you disconnect from the internet, the safer your tv will be.).
The number of people complaining about this exact issue -- all in different locations, with different home network situations -- means this has nothing to do with my router. Especially since most of the other channels work without a problem. Please update the firmware/software/or Netflix App as soon as possible so it works the way it's supposed to... Please get this fixed!
I would make a warranty claim immediately. Roku hasn't acknowledged a problem exists. If you look back through pages (months/years) of this forum, there's a lot of people saying "please fix this" about things that still aren't fixed. Maybe if the tv makers feel the expense of warranting Roku's untested software updates, they'll make themselves heard in a way customers obviously aren't.
You could also consider filing a complaint with the FTC. Your point about bait-and-switch is a good one. (If the tv maker deflects responsibility for their warranty, that's another very strong point to raise in your complaint.). Your state AG's office also takes such complaints, or will know of the state agency that does. (If you're in Canada, you probably have better protections against flim-flam than we do.).
On the surface, that seems obvious & without dispute. But, TCL tvs are inexpensive. If you like the picture, I think it's perfectly reasonable to read the writing on the wall (about Roku and its untested updates). Do a factory reset, tell it you'll setup the internet connect later (but never do it!). You'll find yourself with a less bloated version of Roku's software. It will be protected from future harm (updates) by not being on the internet. You can get a Firestick Lite for $22.
Life is too short to let Roku's irresponsibility be part of it. For $22 more than you spent for your tv, you can protect your investment from untested updates. You won't be constantly wondering if a fix is coming (when history says there's no reason to believe).
When you buy a new laptop, it comes with adware & bloatware which slows down the laptop. People don't say the laptop is useless. They just reinstall a clean version of Windows. I think this situation with Roku is similar. My two TCL TVs are terrific. Kicking Roku out of my house was all they needed.
What I'm saying is: I wouldn't get hung up on the principle of the matter. You're right. Your tv shouldn't be wrecked by untested updates. But, that's how it is. (My brand new laptop shouldn't have bloatware/adware. But, it does.). #Walkaway
I have a new 42" Onn Roku tv that keeps crashing out. It doesn't matter which app I'm running at any given time, (Sling, Roku, Vudu, Etc.), it will suddenly stop running / crash and put me back on the selection screen. It usually does this within 15 minutes or so after turning the tv on but may actually give me up to 30 min. of air time. At times it simply freezes and will not do anything at all unless a hard boot is performed (unplugging). All of the "power saving" options are turned off and it's not the internet as we have at least one other tv running at any given time and this one is the only one presenting any kind of problem. Any idea what's going on? Beginning to feel like a store return is in my future....
I tried a sort of "solution" I read while researching this problem. It may or may not work for anyone else but so far it has for me. Turn the set off by using the power button on the TV, (on my model, it's on the bottom of the set beneath the screen in the center). Then unplug the TV and hold the power button for ten seconds or so. This apparently drains any residual energy / electricity from the set. Plug it back in and turn on using the set's power button. In my case, the set will operate fine for the rest of the day. I have to keep doing it daily though. Sort of a "poor man's" solution but i guess it's better than nothing....
Just a quick addition: I had a TCL Roku with a major problem freezing and my work around was to just bypass everything with a streaming stick. Garbage internals as far as streaming on these Roku TV's?
I also recently bought a 42" Onn roku tv. I paid $88 during a Walmart black Friday sale. I received the tv November 10th 2020 and since then the apps have crashed multiple times and its constantly losing the network connection. I've also restarted my router, uninstalled and reinstalled all my streaming channels and reset the tv to factory settings. Today after the factory reset its already crashed while using the Hulu and Prime video apps. Its very frustrating. Also thinking if returning but with the situation the stores are very chaotic
90f70e40cf