Why Is Roku Buying Video Content?

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Late last week, Roku (NASDAQ: ROKU) announced it had come to an agreement with Quibi, the failed short-form streaming platform, to exclusively host its content on the Roku Channel. Being the operating system for internet-connected TVs (CTVs), it probably came as a bit of a surprise that Roku was being so aggressive buying up content.

But is it the right move for the business going forward? Let’s investigate. 

To give context around why Roku would buy Quibi’s catalog of shows, investors need to understand the company’s business strategy. Roku sells USB sticks and media players that enable TVs to connect to its operating system (OS), and partners with manufacturers to sell TVs with its OS pre-loaded. Equipment sales make up the player revenue segment of Roku’s earnings reports. Last quarter, player revenue was $132.4 million, up 62% year over year, and it made up 29.3% of Roku’s overall revenue.

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