Monday, Sep 21st 2020

Roku +15% on NBCU Peacock Deal


Peacock will finally be taking flight on Roku devices, after months of wrangling — and NBCUniversal’s TV apps will not be going dark on Roku after all. ROKU's stock is up +15% on the news and we remain bullish on this Opportunities holding.

First, Some Background:

  • Peacock (NBCUniversal's Netflix competitor) launched nationwide July 15, but until now it has been unavailable on Roku as well as Amazon Fire TV. WarnerMedia’s HBO Max also remains unavailable on Roku and Fire TV over deal disagreements.
  • Each side (Roku vs. NBCU) had accused the other of making unreasonable demands. NBCU wanted Peacock to be distributed on Roku without giving up a share of the advertising inventory on the service. Roku was insisting on getting some kind of compensation.

Today's News:

  • Roku and NBCU reached a deal Friday afternoon that will provide access to the Peacock app on the streaming platform’s players and Roku-enabled TVs.
  • In addition, the companies renewed their agreement to keep 46 NBCU broadcast and cable apps on Roku, after the media company had threatened to pull them this weekend over the dispute over Peacock.
  • Under the companies’ expanded pact, NBC content will be added to the free, ad-supported Roku Channel.

Why It Matters:

  • We think this deal is incredibly bullish for Roku.
  • While financial terms of the deal weren’t disclosed, there is definitely money changing hands, in the form of NBCU providing some kind of value to Roku. Roku itself said it has a deal for “a meaningful partnership around advertising.”

From Roku: “We are pleased to have reached an agreement with Comcast that will bring Peacock to Roku customers and maintains access to NBCU’s TV Everywhere apps. We look forward to offering these new options to consumers under an expanded, mutually beneficial relationship between our companies that includes adding NBC content to the Roku Channel and a meaningful partnership around advertising.”

That said, we think such distribution standoffs are likely to become more common as Roku and Amazon flex their big installed bases. Roku reported 43 million streaming accounts as of the end of June; Amazon says Fire TV has more than 40 million customers. Prior to Roku’s standoffs over Peacock and WarmerMedia’s HBO Max, the highest-profile case of a similar dispute was when Fox’s TV app was pulled from the platform in January 2020 — before they made peace and the app returned at the 11th hour, one day before the Super Bowl.

We continue to monitor the competitive landscape for signs that Roku's competitive moat could weaken, but for now, its immense household reach remains a distribution advantage enabling it to strike deals like this NBCU agreement.

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