2 Reasons Roku Won the Roku-Peacock Stalemate

Peacock is finally coming to Roku (NASDAQ: ROKU): Over the weekend, Comcast (NASDAQ: CMCSA) finally came to terms with the leading online platform on a deal to carry its new streaming service. Both companies confirmed the agreement on social media, with Roku promising an official announcement in the coming weeks. It's a surprising result since as early as of Friday morning, it seemed as if the status of the negotiations was getting worse

Roku plays host to thousands of streaming apps, but recent debutantes Peacock and HBOMax have been absent from the fast-growing hub, which has 43 million accounts. Most will argue that both Roku and Peacock are better off for having come to terms, but let's go over two big reasons why Roku is the real winner here.

A mounted TV showing Roku's operating system in action.

Image source: Roku.

1. You need Roku out of the gate to matter

It probably isn't a surprise that Peacock would be the first to bridge its gap with Roku since it's an entirely new service. HBOMax is simply an enhanced version of the original HBO apps, which continue to be available through Roku.

Peacock, by contrast, launched a little over two months ago as an outlet for content from Comcast-owned network NBC -- hence its signature mascot as the branding choice. Its big moment may come next year when it becomes the exclusive streaming home of The Office reruns, but its mid-July debut offered a moment for Comcast's new offering to stand out and get noticed. The fact that Roku and Fire TV users were unable to access the platform likely doomed Peacock to a Quibi-like launch. 

Quibi -- for the many people out there unfamiliar with it -- is a streaming platform that launched earlier this year with an all-star cast of costly short-form content. Despite spending a ton of money on programming and even springing for a Super Bowl ad, its decision to launch as a mobile-only platform meant that it wouldn't play on Roku or other TV-based hubs. The result: It flopped. In his opening monologue at the Emmys on Sunday night, Jimmy Kimmel called Quibi the dumbest thing ever to cost a billion dollars. 

Roku never had a chance to help drive an audience to Quibi, but Peacock could have been different. However, Comcast's attempt to launch it without getting Roku and Fire TV on board -- and the relatively tepid response the service's debut generated as a result -- should serve as a cautionary tale for any future entrants to the streaming game. 

2. Roku is establishing itself as an essential partner

Like any app store, Roku isn't free for the service providers that want access to its large and growing audience. It expects a piece of the action when folks sign up for a service through its platform, and also demands a chunk of the ad revenue generated by ad-supported offerings. Peacock and HBOMax couldn't come to terms with Roku in time for their launches earlier this year, but thought they could make a big enough splash without it. Now, they're starting to realize that you can't truly succeed in streaming without the leading player on your side. 

Roku users are growing in both number and in media consumption through the hub, and that makes the company a necessary partner for a streaming service looking to reach the largest audience possible. There's been plenty of chatter among industry pundits about Roku usage surging during the pandemic due to folks spending so much more time at home, but the trends were heading in that direction even before COVID-19 became our grim reality.  

Quarter Active Roku Users Hours Streamed Days in Quarter Average Daily Hours Per User
Q1 2019 29.1 million 8.9 billion 90 3.4
Q2 2019 30.5 million 9.4 billion 91 3.39
Q3 2019 32.3 million 10.3 billion 92 3.47
Q4 2019 36.9 million 11.7 billion 92 3.45
Q1 2020 39.8 million  13.2 billion 91 3.64
Q2 2020 43.0 million 14.6 billion 91 3.73

Data source: Roku quarterly reports.

Active users and hours streamed are naturally going to keep growing, but it's the final column in that table that really bears watching. The average user is now spending 3.73 hours a day streaming through Roku's operating system. That figure may eventually hit a peak and plateau, but keep in mind that the 43 million users figure only presents the number of active accounts. It certainly represents far more than 43 million people, given that families, couples, and roommates are often on a single Roku account.

Even if Roku demands a big slice of the revenue pie from its apps -- just like mobile app stores do -- it's worth it. Media companies know the score now, and it will be highly unlikely that another prolific new streaming video service will try to launch without signing a deal with the platform under the mistaken assumption that it can get enough traction without it. Roku is the tastemaker. Roku is the ultimate influencer. Ignore Roku at your own peril.

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Rick Munarriz owns shares of Roku. The Motley Fool owns shares of and recommends Roku. The Motley Fool recommends Comcast. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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