On Wednesday, Roku (NASDAQ: ROKU) announced it had reached a deal with AT&T’s WarnerMedia to bring HBO Max to its platform. Following the news, Roku shares were up 2% on Wednesday and are up more than 4% after-hours today. AT&T debuted HBO Max in May as its answer to Netflix, but was noticeably absent from both Roku and Amazon Fire TV.
Roku’s brand-agnostic platform relies heavily on advertising and subscription revenue, therefore, the more viewers it can attract with new services, like HBO Max, the more revenue it can generate from ads. With the agreement, Roku’s users get access to yet another streaming service which will likely improve retention rates whilst attracting additional customers to the platform. Additionally, the more users the platform has the more likely it will be able to sign more deals with other media channels and streaming services.
In September, NBCUniversal’s streaming app, ‘Peacock’, joined Roku’s platform after reaching an agreement that included advertising as a major factor. Signing more TV channels and subscription services is a great way for Roku to grow and seems to be its plan going forward. Scott Rosenberg, senior vice president of Roku, explained, “reaching mutually beneficial agreements where Roku grows together with our partners is how we deliver an exceptional user experience at an incredible value for consumers.”
What does HBO Max get from the deal?
Last week, AT&T’s CEO John Stankey confirmed that HBO Max has 12.6 million users, which pales in comparison to Netflix’s 195.15 million users and the 86.8 million subscribers Disney+ has. Therefore, the deal could boost HBO Max users by giving it wider distribution, as Roku now has over 46 million active accounts. WarnerMedia cited in a press release that more hours of TV are streamed from Roku devices than any other platform, meaning HBO Max is taking its service to a huge audience.
To attract these potential new users, WarnerMedia announced it is providing HBO Max with lots of new content. The company plans to release all of its 17 movies for 2021 on HBO Max the same day they debut in theatres. The upcoming blockbuster, ‘Wonder Woman 1984’, will be available on the streaming service to Roku owners on Christmas Day. HBO Max was said to be motivated to get a deal signed with Roku as soon as possible to ensure the blockbuster hit was available to stream on the popular platform.
The streaming platform has had a good year and its investors were impressed with its latest Q3 results as the platform gains in popularity. The company increased its active user accounts to 46 million, up 43% on a year-over-year (YoY) basis, whilst revenue generated rose by 73% to $319 million. Although Roku still faces heightened competition from Google, Amazon, and Apple, it separates from the pack by focusing on hardware sales and advertising instead of subscription fees like the tech giants do.
Roku stock is set to rise
The streaming provider shares are up 137% year-to-date by adding millions of users during the pandemic as people turned to Roku for entertainment.
The HBO Max deal is great news for Roku as it has now finally landed the one major streaming service it was missing. Now with all the major TV channels available on its platform, it is likely that its stock will continue to rise as it becomes the top choice for people ditching their traditional cable packages in favor of connected-TV platform, Roku.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.
Financial Writer at MyWallSt
Nicole's favorite stock is Etsy because she loves its original and handmade items. She believes people are going to stop buying mass-produced items and start purchasing ‘one of a kind’ fashions and furnishings. In a world of sameness, Etsy has the advantage.