Roku, the video streaming platform, has unveiled plans to go public in what could be the first high-profile US listing of the post-summer season.
The group gave the traditional $100m place holder for the amount of the deal in paperwork filed with the Securities and Exchange Commission, but no further details were available on the size of the offer or the prospective valuation.
Riding the growth of streaming services such as Netflix and Hulu, Roku has come to dominate the US market for watching internet video on full-size screens. It sells a range of set-top boxes and lower-priced dongles, as well as integrating its technology into TV sets themselves.
Anthony Wood, Roku’s founder and chief executive, said that its “mission” was to become the “TV streaming platform that connects the entire TV ecosystem”, as the media industry reaches a “tipping point” of online viewing.
“I believe that just like mainframe operating systems didn’t transition to PCs, and just like PC operating systems didn’t make the transition to phones . . . TVs will be powered by a purpose-built operating system optimised for streaming,” he wrote in a letter to potential investors.
The streaming trend has propelled Roku to rapid but unprofitable growth over its 15-year existence. For the six months ended June 30, Roku listed total net revenue of $199.7m, up from $162.3m in the same period a year ago. Losses from operations narrowed to $24.2m from $33.2m.
Roku has been lossmaking since it was founded in 2002 and warned potential investors that it expected to incur “significant losses in the future” because of the costs of going public and expanding its operations.
While it has found success as a relatively neutral player amid the warring factions of Apple, Amazon and Google, Roku is finding itself increasingly in competition against the very companies upon who it relies for content and data. Some of Roku’s most popular channels limit access to viewing data, which reduces its ability to target advertising based on user behaviour.
In a recent research report, analysts at eMarketer estimated that Roku leads the US market for connected TV devices with 38.9m active users, but with Google’s Chromecast and Amazon’s Fire TV close behind. At the same time, Google’s YouTube and Amazon Video are among its most popular channels, while Apple does not allow videos purchased on its iTunes content store to be viewed on devices other than its own.
Smartphones and tablets such as iPhones and iPads, where Roku has a less significant presence, make up an increasing portion of online video viewing. Nonetheless, Roku is far ahead of Apple in the TV box market, with eMarketer finding the iPhone maker placed a “distant fourth”.
Maintaining close relations with Netflix will be important for Roku, as the streaming service — which has 104m subscribers — accounts for as much as a third of all the hours of video watched on its platform. Roku is in the “final year” of its current distribution deal with Netflix, and if it does not strike a new agreement in time, it could have to remove its most popular channel.
“Although Netflix is the largest provider of content across our platform, revenue generated from Netflix was not material to our overall revenue during the six months ended June 30 2017, and we do not expect revenue from Netflix to be material to our operating results for the foreseeable future,” Roku added.
The US listings market faced a downturn in 2016, with the fewest listings in years. While issuance has picked up this year, two companies with well-known brand names that went public in 2017 have seen their shares fall.
Snap, the owner of Snapchat, listed in March at $17. After an early rally to as high as $29.44, the shares have since fallen sharply on heated competition from Facebook. Snap shares closed on Friday at $14.27.
Blue Apron listed at $10 in June, but the meal kit delivery service now trades at about half that price.
Morgan Stanley and Citigroup were listed as the lead underwriters for the Roku IPO along with Allen & Company and RBC Capital Markets. Officials for the banks were not immediately available to comment.