There's been a lot of activity in the streaming space in recent weeks. New streaming services from Walt Disney (NYSE: DIS) and Apple (NASDAQ: AAPL) debuted, and many believe the entry of these two titans will inevitably reshape the entertainment landscape.
Streaming pioneer Roku (NASDAQ: ROKU) was besieged in early September when Apple announced the aggressive pricing of its upcoming Apple TV+ streaming service, which debuted early this month for the bargain-basement price of $4.99 -- much lower than many had anticipated. Fear that growing competition would dent Roku's business caused its stock to lose more than one-third of its value in the weeks that followed.
Turns out the addition of these new streaming services has actually helped Roku -- rather than hurt it -- something Roku's management had predicted.
Downloads are soaring -- and not just Disney+
Disney+ soared out of the gate, attracting 10 million subscribers on its first day. In the two weeks since, there's been a surge of app downloads associated with its debut. The Disney+ app has been downloaded 15.5 million times in the 13 days post-launch, according to a new report released by market intelligence company Apptopia. It isn't the only streaming app that's attracting strong demand. The pricing bundle offered by Disney also resulted in soaring downloads of both Hulu and ESPN, which increased by 55% and 52%, respectively.
Perhaps the most intriguing tidbit from the report is that there's also been a strong demand for the Roku app. The data shows that over the past 13 days, downloads of the Roku app have climbed nearly 30% compared to the prior 13-day period. The streaming pioneer was likely an unintended beneficiary, as the Disney+ service was available to stream across Roku's ecosystem of devices and smart televisions that use its operating system (OS) -- currently found on 1-in-3 smart TVs sold in the U.S.
The outcome foretold
Investors might be surprised to learn that even Roku management had predicted a positive outcome earlier this month. During its third-quarter conference call, analyst Vasily Karasyov of Cannonball Research asked if competition from Disney+ and Apple TV+ would hurt Roku's advertising business. CEO Anthony Wood pointed out that both products would be available on Roku's platform and help drive growth:
We're excited about the launch of all the new services coming to the industry and to our platform. We think that they are good for Roku in a bunch of ways. They're obviously going to drive viewing overall on our platform and engagement, which is good. ... They're going to increase the interest in viewership moving from traditional TV to streaming. We think that eventually all TV is going to be streamed and that the rise of all these new services will help encourage that transition.
The tech giant is already having a banner year as demonstrated by its results. For the first nine months of 2019, Roku's revenue grew 54% compared to the prior-year period. Its platform revenue -- which includes advertising, The Roku Channel, and its smart TV OS -- grew at an even quicker pace, up 81%. Roku's active subscriber accounts climbed to 32.3 million, up 36% year over year in the third quarter, while steaming hours grew 68% to 10.3 billion.
The number of video ad impressions more than doubled year over year, and ad impressions on The Roku Channel are growing even faster. Roku is generating more revenue relative to each subscriber, as average revenue per user grew to $22.58, up 30% compared to the prior-year quarter.
These impressive results have also propelled Roku's stock, which has gained more than 400% so far this year.
If the surge in downloads of the Roku app is any indication, management was right on the money, and the debut of Disney+ is another plus (pun intended) for Roku.
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Danny Vena owns shares of Apple, Roku, and Walt Disney and has the following options: long January 2021 $190 calls on Apple, short January 2021 $195 calls on Apple, and long January 2021 $85 calls on Walt Disney. The Motley Fool owns shares of and recommends Apple, Roku, and Walt Disney and recommends the following options: long January 2021 $60 calls on Walt Disney and short January 2020 $130 calls on Walt Disney. The Motley Fool has a disclosure policy.
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