"TV Brand + Streaming Media"Boosts Performance and Share Prices of Roku and TCL Electronics
The long-term partnership between the US largest streaming platform Roku (ROKU.US) and TCL Electronics (01070.HK) has been paid off with outstanding financial results and stock performance of both companies.
According to Roku's Q4 financial report of 2019, its net revenue was up by 49% year-on-year to USD 411.2 million.
For the whole year of 2019, Roku's core operating data continued to beat market expectations. Specifically, its total net revenue grew 52% over the previous year to hit USD 1.1289 billion, including, USD 740.8 million was contributed by its platform revenue, which jumped 78% as compared to 2018. Roku's gross profit reached USD 495.2 million, with a year-on-year increase of 49%.
Not only Roku recorded a performance growth, but also it rapidly expanded its user base. In 2019, it added 9.8 million active accounts, bringing the year-end number of such accounts to 36.9 million. The streaming hours rose 16.3 billion hours year-on-year to a new high of 40.3 billion hours, and the average revenue per user (ARPU) increased USD 5.19 to USD 23.14. Last but not least, Roku monetized video advertising impressions more than doubled year-on-year in 2019.
Driven by sustained performance growth, the share price of Roku more than quadrupled in 2019, signaling bullish market sentiment on its prospects.
Roku's Road to Success in the US: Ecosystem Strategy Featuring TV Brand + Streaming Media
The 2019 success of Roku, in both enlarging its user base and uplifting its business performance, was the result of Roku's double-down during the year on its TV ecosystem expanding strategy. This strategy could not have worked without premium hardware support, even it had robust software. In other words, the sweeping victory of Roku in the US market could not be separated from the higher sales volume, larger market share, and more extensive sales channels of TCL TV.
In its financial report, Roku pointed out that almost one-third of smart TVs sold across the US in 2019 were Roku TVs. Meanwhile, Roku predicted that roughly half of all U.S. TV households will have cut the cord or never had traditional pay TV by 2024. A report by Morgan Stanley reckons that Roku's active account growth has benefited strongly in the US from share gains of TCL TV. TCL Electronics is Roku's largest partner in the US, and over 60% of Roku TVs nationwide are TCL Roku TV. The TCL 8-Series Roku TV, specifically mentioned in Roku's financial report, has received quite a number of grand awards since being launched and is renowned as an extremely cost-effective TV.
PCMAG, which provides professional reviews on products and technologies as the flagship media outlet published by Ziff Davis, issued Readers' Choice Award 2019 for TVs to TCL and Sony, which defeated major brands like Samsung and LG. The award decision was based on a comprehensive evaluation in five aspects -- ease of use, cost/value, setup, smart TV and likelihood to recommend. In January 2020, TCL QLED TV 8K X9 received "8K QLED TV Gold Award 2019-2020" from IDG. Evidently, the product competitiveness, innovative technology and comprehensive strength of TCL Electronics have won recognition worldwide and been well received by markets.
In the first three quarters of 2019, TCL brand TVs sold in the US gained 3.3 percentage points in market share, consolidating a top-2 place. The gap of market share has been narrowed from 9.1 percentage points to 3 percentage points between TCL brand TVs and Samsung. TCL Electronics actually outperformed Samsung in March and July of 2019 and claimed the top spot in the US market, which strongly connected with the cooperation between it and Roku.
Good Partners Help with Fast Overseas Expansion and Quick Monetization
In its financial report, Roku says it is taking a step-by-step approach to broadening its influence outside the US. Since 2019, the company has cooperated with various TV brands to make inroads into markets like the UK and Brazil. Obviously, support from TV brand is indispensable as it goes global.
Overseas expansion inevitably has to confront with increased expenditures, such as market development and marketing. How can Roku achieve a tradeoff between minimizing additional costs and expanding its global presence at a fast pace? What a streaming media platform is mostly eager for is a powerful partner, and vice versa for a TV brand.
TCL Electronics has taken the lead in implementing "TV brand + streaming media/OS platform" strategy for its global penetration. In addition to the partnership with Roku in the US, the company had launched TCL Android TVs in Europe and emerging markets in joint with Google in 2019. Sales volume of TCL branded TVs in Europe grew by 35% year-on-year in 2019 and in the fourth quarter alone, the growth rate was even faster at 54% year-on-year. In Spain, the UK and Italy, year-on-year growth all exceeded 200%. In emerging markets, sales volume surged 41% in 2019, and the fourth quarter witnessed a huge growth of 57%, compared to the same period of 2018. The yearly sales volume in sales India and Argentina doubled up in 2019.
TCL Electronics has gained strong foothold in overseas markets, makes it possible for the company to quickly monetize its partnership model. In the first half of 2019, partnership with Roku and Google generated HKD 96.02 million revenue of overseas Internet business for the company, making it the first Chinese enterprise in the industry with large scale and sustainable revenue from overseas Internet business. In November 2019, the company announced on its renewed global partnership with Netflix and expected to scale up its revenue from overseas Internet business. The company's strength in globalization has apparently been attractive to high-quality partners, including successful TV OS platforms and streaming media companies.
Built on the current development momentum, it is foreseeable that TCL Electronics will be transforming into a smart tech firm, with an aim to have software/Internet services and hardware contribute 50% of profits respectively, in three years.
Powered by its overseas market expansion and breakthrough in Internet business, the company's share price had surged nearly 30% since the release of its positive profit alert in February 2019, hitting the peak at HKD 4.5. There is still room for the stock price to go up further. In the wake of the positive profit alert, CICC and Orient Patron both issued updated reports, raising TP to HKD 5.5 and HKD 6.10, respectively, indicating of over 30 percent growth potential.
In overall, TCL Electronics has been rolling out its "TV + Internet" strategy in global wide, which will gradually unleash tremendous growth potential in the future.