Last week, Roku held a press event in New York where they unveiled their latest streaming devices, wireless cameras, and minor adjustments to their existing, content-driven interface. If you were hoping for a dramatic update to Roku OS, Lucas Manfredi has the disappointing details over at The Wrap:
The platform introduced a “Coming Soon to Theaters” row and personalized sports highlights. It also launched short-form content rows in the All Things Food and All Things Home destinations for users to easily find smaller curated clips, from recipe tutorials to home organization hacks. It also unveiled badges to help users differentiate between free, paid, new and award-winning content.
If you have used Roku devices or TVs recently these announcements seem disproportionate to the scale of the event where Masaharu Morimoto served sushi, and puppies were available for adoption.
The hardware devices themselves don’t do anything novel over existing devices to justify this fanfare. That’s not that surprising when you consider that Roku loses money on its hardware. Ars Technica’s Scharon Harding summarizes it well:
For a clearer picture of how critical ads are to Roku’s business, in its fiscal Q4 2024 earnings report shared on February 15, Roku revealed that its devices division lost $80.4 million during the fiscal year. Meanwhile, its platform business, which includes Roku OS and its advertising arm, reported about $1.89 billion in gross profit.
Roku is the number one streaming platform in the U.S. It has been able to place promotions and ads in such a way that they drive consumers to shows and material, and has done so in a way that has mostly only grown its user base and the value of its promotional real estate.
Roku recently tested the limits of its customers by displaying an ad before the customer gets to the Roku interface. Chris Welch from The Verge asked Roku’s ad marketing lead, Jordan Rost, about that mess:
Rost didn’t say as much directly, but it’s apparent that Roku was keenly aware of the bubbling up of complaints. “Advertisers want to be part of a good experience. They don’t want to be interruptive,” he told me.
“We’re always testing. We listen to consumer feedback, we do all of our own A/B testing on the platform. We’re constantly tweaking and trying to figure out what’s going to be helpful for the user experience.”
I never expected the ad guy to say, “Ads suck!”, so this is completely in line with my expectations. Welch also asked him about that notorious patent to inject ads into the streams of non-Roku content. Again, he said nothing shocking:
He said Roku’s own platform is the “primary” focus of its ads strategy. But last month’s misstep isn’t going to stop the bigger plan to keep pushing to make ads more shoppable, interactive, relevant, and “delightful.”
I support Chris’s use of quotation marks around “delightful,” even if he was directly quoting Rost.
Recently, I had occasion to use a Roku 4K+ for a few weeks as my primary TV streamer, and it’s not all terrible ads top to bottom. As much as I might complain about ads, I see why most people don’t. Not because the drooling masses don’t know any better, but because everyone has different thresholds for advertisements and promotions.
The famous Roku City screensaver is actually a good metaphor for this. There’s a car driving through a city where there are various illustrated storefronts and billboards. The ads populate the places a person would see these things in real life—for example, I saw an ad for The Home Depot on the side of a building. It has absolutely nothing to do with entertainment whatsoever, but it’s more subtle than an autoplaying video before you get to the home screen. (People even have some strange affection for this screensaver, even though it’s an ad vehicle.)
Roku’s ads are mostly banner images that remind me of the old days of the web. They don’t even take up as much screen real estate as Amazon’s Fire TV interface bludgeoning poor Jason with mattresses. Roku’s content-driven interface obviously has value—otherwise advertisers and studios wouldn’t pay for placement there. The same goes for Amazon.
Every person will have their own tolerance level for advertising tested by the array of devices and services that they can use to watch TV, what the ads are for, how they are delivered, and how much they paid for the streaming device that shows it to them. Everyone will have a different threshold.
Suppose you’re weighing the difference between a cheap streamer box and paying maybe $100 more for a premium Apple model. In that case, Apple might be able to make the case that—despite its overbearing promotion of Apple TV+ subscriptions throughout the TV app—it provides an experience that’s a cut above the competition in terms of not pushing ads at you from every corner of the screen and using your viewing data to profile you.
But it doesn’t do that. Since 2015, it’s been all about how powerful the Apple TV is.
It can play games (third-party controller not included)! It can be a smart home hub (entry-level model no longer includes a Thread radio)! You can connect HomePods in stereo pairing modes (please buy two, very old, very slow-to-respond smart speakers that will grab requests they can’t act on)! It has Siri (it won’t get Apple Intelligence Siri or access your semantic index)! There are user profiles built into the OS (that don’t do anything)! You can watch Apple TV+ on it (or literally anything else)!
Competing devices tend to be pretty pokey (either because of underpowered hardware, or poorly optimized code), but they succeed because they’re cheap, and they’re just for TV. Apple recycles iPhone chips into Apple TVs, and anyone can tell you they’re overkill for simply streaming video to a TV.
There are rumors that there’s a new Apple TV coming later this year. It’ll likely have a chip that’s closer to the current generation of phone chips, which doesn’t suggest the boxes are getting any cheaper.
Roku and Amazon treat their hardware as a loss leader to get people into a platform where they can be monetized. Apple doesn’t need to do that, but there’s still plenty of room here to make an Apple TV box that just does TV. (Apple used to sell the 3rd generation Apple TV for $70. There’s certainly room under $130 for a stripped-down device.)
Cynically, a person could say that Apple needs to copy what Roku is doing and integrate ads into the interface—just as it’s so deftly integrated ads into the App Store—and subsidize the hardware. I don’t have any interest in seeing it do that.
I’d rather see Apple try to compete with these low-end devices by offering something priced a bit lower, with a revamped content-driven interface. Apple will never be able to match Roku or Amazon on price, but if it could offer a sub-$100 box with good content recommendations, combined with a story about limiting ads and ensuring privacy, it could make a more persuasive case.
[Joe Rosensteel is a VFX artist, writer, and co-host of the Defocused and Unhelpful Suggestions podcasts.]
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