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Roku is becoming the most powerful company in streaming

A growing user base will give it even more power in content negotiations.

Roku is becoming the most powerful company in streaming

Roku's emerging as one of the streaming war's biggest winners.

Photo: Luke Sharrett/Getty Images

Roku's bet on smart TVs is paying off: Seven years after the company first began licensing its operating system to TV manufacturers, it has become a market leader in North America. Roku and its hardware partners sold more smart TVs in the U.S. in 2020 than competitors like Samsung, LG and Vizio, according to data from the NPD Group released by Roku on Friday.

Roku TVs had a 38% market share in the U.S. and a 31% market share in Canada, according to NPD's data. Roku also announced earlier this week that it had ended 2020 with 51.2 million active accounts, adding around 14 million accounts over the past 12 months. Altogether, consumers streamed 58.7 billion hours of entertainment through their Roku devices in 2020, according to a news release.

Both data points demonstrate how much of a force the company has become in North America, giving it even more power in negotiations with media companies looking to run their services on Roku streaming sticks and TVs. However, they also highlight how much Roku's business has been solely focused on the TV space, giving competitors a chance to dominate other smart device categories.

After first making a name for itself with its streaming boxes, Roku began licensing its operating system to TV manufacturers in 2014, with one of its early licensing partners including China's TCL, then virtually unknown in North America. With affordable TV sets and a UI that emphasized simplicity over fancy new features, TCL and Roku managed to grow their market share year after year; at the end of 2019, every third smart TV sold in the U.S. was running Roku's operating system.

The growing popularity of Roku TVs and streaming devices has helped the company grow its advertising business and negotiate more favorable contracts with media companies looking to launch their apps on its platform. Roku is not only demanding revenue and ad-sharing agreements for any app that runs on its platform, but is also increasingly pressing media companies to make parts of their catalog available via its own free Roku Channel streaming service. Last year, negotiations between AT&T and Roku broke down, resulting in HBO Max not being available in Roku devices for six months.

Roku's expansion into other hardware categories has been more of a mixed bag. The company has made its own wireless speakers that work only with Roku TVs and streaming devices, but listings on various ecommerce websites suggest only modest demand. Roku's wireless bookshelf speakers were ranked No. 2,850 on Amazon.com's sales charts for consumer electronics devices at the time of writing. For comparison, Amazon's own Echo Dot speaker ranked No. 1, with other Amazon speakers and smart displays following closely behind.

At one point, Roku developed a dedicated Wi-Fi product called Roku Relay that was supposed to optimize wireless connectivity for Roku streaming devices. The company tested Relay with a small number of consumers, but ultimately decided to not bring it to market.

Roku has been making some headway in cooperating with third-party companies in the audio space with a licensing program for third-party sound bars and speakers. Participating companies can market their devices as Roku TV Ready and integrate software to simplify setup. Roku TV Ready partners include TCL, Hisense, Enclave, Sound United and Bose, with Element scheduled to launch its own Roku TV Ready products this month. On Friday, Roku also announced that TCL would launch the first Roku TV Ready wireless sound bar in the coming months.

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