As Roku becomes more like TV, some partners say it’s abusing its power

The company recently changed the terms of its distribution agreements for linear streaming channels. Some critics say Roku, like other streamers, is consolidating power.

A Roku Inc. signage on a Smart television in an arranged photograph in Hastings-on-Hudson, New York, U.S., on Sunday, May 2, 2021. Roku Inc. is scheduled to release earnings figures on May 6. Photographer: Tiffany Hagler-Geard/Bloomberg via Getty Images

Some allege that Roku’s latest contractual changes are an example of platform providers consolidating power.

Photo: Tiffany Hagler-Geard/Bloomberg via Getty Images

In recent weeks, Roku began to send notices to many of its content partners, informing them that it would change a key distribution agreement. The changes applied to free, ad-supported streaming channels, also known as FAST channels in industry parlance, which have been a massive growth engine for TV makers and publishers alike.

Roku told its partners they would have to switch some of the technology powering their channels to its in-house stack, and that it would decrease revenue share payouts by 5%. But what concerned Roku’s partners the most were the indirect implications of these changes: By taking control of the technology powering these linear channels, Roku was also limiting access to the data related to channel performance.

FAST channels have become very popular with streaming audiences because they provide a cable TV-like leanback experience, free of charge. As those channels draw increasingly large audiences, some industry insiders argue that streaming platforms have to behave more like traditional TV services to match their level of quality. Others allege that Roku’s latest contractual changes are just the latest example of platform providers consolidating power.

‘A bit of a money grab’

Roku began adding free linear programming to its streaming devices and TVs in 2018 as part of its efforts to turn the Roku Channel into a destination for ad-supported video. The company has long offered publishers a 60/40 ad revenue split for both on-demand and linear content.

Under the new terms, Roku keeps 45% of net advertising revenues. That’s still less than the cut some competing platforms take, according to industry insiders. However, given Roku’s size, the change has significant impact on the business of these channel providers, with one of the affected publishers calling it “a bit of a money grab” in a conversation with Protocol.

In conjunction with the new financial terms, Roku is also requiring linear channel providers to use the company’s CDN services as well as its ad insertion technology. Prior to that, publishers were free to either use third-party solutions providers for both or directly buy resources from vendors like Amazon’s AWS.

Two sources told Protocol that Roku’s move was primarily prompted by past outages related to popular live events; one source suggested that the company may be looking to transition its FAST partners to the new platform in time for the midterm elections to prepare for anticipated live audience surges. The company began to transition a first set of partners to its new platform in May and aims to bring over all remaining FAST channels in multiple stages in the coming months.

“Roku is committed to providing our customers with the best streaming experience possible, with our new system allowing for easier delivery of content and improved quality,” said a Roku spokesperson via email.

However, by taking CDN and ad insertion tech in-house, Roku is also taking control of the kind of viewership and ad performance data necessary to program these channels, and the company is said to not have any infrastructure in place yet to report some of this data with a lot of granularity, or in real time. Multiple Roku partners who spoke to Protocol under the condition of anonymity expressed fear that they would have a lot less data about the performance of FAST channels going forward.

Changes like that not only make it harder to program these channels: In some instances, FAST channel operators also have revenue share agreements with content owners that require them to know exactly how many ad spots were served during a show or movie. "The data picture is getting increasingly bleak,” an affected publisher told Protocol.

Using data as a competitive advantage

Roku is not the only streaming platform operator looking to take control of lucrative FAST channels. Samsung has also been pushing publishers to use its own CDN, but multiple sources told Protocol the company had been more measured in its demands, which included giving partners longer lead time for the switch-over and offering more access to data from the get-go.

Samsung, Roku and competitors like Pluto and Vizio are also increasingly programming their own FAST channels to run alongside licensed channels from third-party publishers. Samsung, for instance, operates a “Baywatch” channel as well as a channel called “My Kitchen Nightmares.” Altogether, the TV maker now operates around 20 free linear channels on its TV Plus streaming platform.

By contrast, Roku only operates a handful of its own FAST channels based on programming from the “This Old House” franchise the company acquired in March 2021. Some of the sources Protocol talked to expect the company to add more owned and operated linear channels to its programming in the coming months, and the fear is that Roku may use some of the data it isn’t sharing with partners to inform those programming choices.

"They are being advantaged competitors," one source said. Another called it “classic big platform bad behavior.”

Roku declined to discuss details about its data reporting on the record, but a spokesperson signaled that the company was willing to address publisher concerns related to the subject in the coming months. “When we make changes like this, we work with our partners to achieve the desired benefit and have a shared interest in building a successful business together that best serves our users,” the spokesperson said via email.

Internet TV becomes more like TV

The transition of TV programming to the internet has been a watershed moment for consumers and content companies alike. People can now watch programming for free that used to be tied up in $100 cable bundles. Programmers have more avenues to people’s eyeballs, and are less beholden to a small group of gatekeepers. Online TV networks and advertisers are able to track who is actually watching and interacting with their content, with real-time data replacing much less granular Nielsen-type viewership metrics.

Now, there is a fear among programmers that the tide is turning. Streaming platform operators are emerging as the new gatekeepers, and access to data is becoming a major point of contention as part of this power shift — a shift that makes streaming media look a lot more like the business of traditional television.

Not everyone sees this as a negative. Frequency, one of the startups that manages FAST streaming channels for a number of publishers, told existing and prospective partners in an email last week that policies like those instituted by Roku now would make things simpler and cheaper for FAST channel operators.

“These changes reflect the rapid evolution of FAST, and the adoption of business and operational models similar to those in the traditional linear ecosystem,” Frequency’s Jon Cohen, the senior vice president of Business Development, wrote in that email.

Others don’t see these changes in such a positive light. “It's a back to the future thing," said one publisher affected by Roku’s changes.

"This is a giant step backwards," agreed another source. "They're trying to put the toothpaste back in the tube."


Judge Zia Faruqui is trying to teach you crypto, one ‘SNL’ reference at a time

His decisions on major cryptocurrency cases have quoted "The Big Lebowski," "SNL," and "Dr. Strangelove." That’s because he wants you — yes, you — to read them.

The ways Zia Faruqui (right) has weighed on cases that have come before him can give lawyers clues as to what legal frameworks will pass muster.

Photo: Carolyn Van Houten/The Washington Post via Getty Images

“Cryptocurrency and related software analytics tools are ‘The wave of the future, Dude. One hundred percent electronic.’”

That’s not a quote from "The Big Lebowski" — at least, not directly. It’s a quote from a Washington, D.C., district court memorandum opinion on the role cryptocurrency analytics tools can play in government investigations. The author is Magistrate Judge Zia Faruqui.

Keep ReadingShow less
Veronica Irwin

Veronica Irwin (@vronirwin) is a San Francisco-based reporter at Protocol covering fintech. Previously she was at the San Francisco Examiner, covering tech from a hyper-local angle. Before that, her byline was featured in SF Weekly, The Nation, Techworker, Ms. Magazine and The Frisc.

The financial technology transformation is driving competition, creating consumer choice, and shaping the future of finance. Hear from seven fintech leaders who are reshaping the future of finance, and join the inaugural Financial Technology Association Fintech Summit to learn more.

Keep ReadingShow less
The Financial Technology Association (FTA) represents industry leaders shaping the future of finance. We champion the power of technology-centered financial services and advocate for the modernization of financial regulation to support inclusion and responsible innovation.

AWS CEO: The cloud isn’t just about technology

As AWS preps for its annual re:Invent conference, Adam Selipsky talks product strategy, support for hybrid environments, and the value of the cloud in uncertain economic times.

Photo: Noah Berger/Getty Images for Amazon Web Services

AWS is gearing up for re:Invent, its annual cloud computing conference where announcements this year are expected to focus on its end-to-end data strategy and delivering new industry-specific services.

It will be the second re:Invent with CEO Adam Selipsky as leader of the industry’s largest cloud provider after his return last year to AWS from data visualization company Tableau Software.

Keep ReadingShow less
Donna Goodison

Donna Goodison (@dgoodison) is Protocol's senior reporter focusing on enterprise infrastructure technology, from the 'Big 3' cloud computing providers to data centers. She previously covered the public cloud at CRN after 15 years as a business reporter for the Boston Herald. Based in Massachusetts, she also has worked as a Boston Globe freelancer, business reporter at the Boston Business Journal and real estate reporter at Banker & Tradesman after toiling at weekly newspapers.

Image: Protocol

We launched Protocol in February 2020 to cover the evolving power center of tech. It is with deep sadness that just under three years later, we are winding down the publication.

As of today, we will not publish any more stories. All of our newsletters, apart from our flagship, Source Code, will no longer be sent. Source Code will be published and sent for the next few weeks, but it will also close down in December.

Keep ReadingShow less
Bennett Richardson

Bennett Richardson ( @bennettrich) is the president of Protocol. Prior to joining Protocol in 2019, Bennett was executive director of global strategic partnerships at POLITICO, where he led strategic growth efforts including POLITICO's European expansion in Brussels and POLITICO's creative agency POLITICO Focus during his six years with the company. Prior to POLITICO, Bennett was co-founder and CMO of Hinge, the mobile dating company recently acquired by Match Group. Bennett began his career in digital and social brand marketing working with major brands across tech, energy, and health care at leading marketing and communications agencies including Edelman and GMMB. Bennett is originally from Portland, Maine, and received his bachelor's degree from Colgate University.


Why large enterprises struggle to find suitable platforms for MLops

As companies expand their use of AI beyond running just a few machine learning models, and as larger enterprises go from deploying hundreds of models to thousands and even millions of models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

As companies expand their use of AI beyond running just a few machine learning models, ML practitioners say that they have yet to find what they need from prepackaged MLops systems.

Photo: artpartner-images via Getty Images

On any given day, Lily AI runs hundreds of machine learning models using computer vision and natural language processing that are customized for its retail and ecommerce clients to make website product recommendations, forecast demand, and plan merchandising. But this spring when the company was in the market for a machine learning operations platform to manage its expanding model roster, it wasn’t easy to find a suitable off-the-shelf system that could handle such a large number of models in deployment while also meeting other criteria.

Some MLops platforms are not well-suited for maintaining even more than 10 machine learning models when it comes to keeping track of data, navigating their user interfaces, or reporting capabilities, Matthew Nokleby, machine learning manager for Lily AI’s product intelligence team, told Protocol earlier this year. “The duct tape starts to show,” he said.

Keep ReadingShow less
Kate Kaye

Kate Kaye is an award-winning multimedia reporter digging deep and telling print, digital and audio stories. She covers AI and data for Protocol. Her reporting on AI and tech ethics issues has been published in OneZero, Fast Company, MIT Technology Review, CityLab, Ad Age and Digiday and heard on NPR. Kate is the creator of RedTailMedia.org and is the author of "Campaign '08: A Turning Point for Digital Media," a book about how the 2008 presidential campaigns used digital media and data.

Latest Stories