Rivalry between Roku and Walmart’s Vizio Streaming Play
There is an abundance of formidable rivals to Roku. The timing of the new streaming TV platform is still not ideal.
This is a major one. The world’s largest company by yearly revenue will now own a connected TV brand that competes with Roku on both real and virtual shelves thanks to Walmart’s acquisition of Vizio, which the retailer revealed Tuesday morning alongside its fiscal fourth-quarter results. It also gives Walmart a leg up in the ad and subscription sales industry, which, as Roku has shown, can be much more lucrative than selling TVs directly to customers.
Despite Walmart’s best efforts, not all of its media dreams have come to fruition. In the past, the business has contemplated launching a full-fledged streaming service to rival Netflix and similar companies. Streaming box and linked TV manufacturer Roku has a history of competing successfully with industry heavyweights like Amazon, Google, Samsung, and Apple. Insider Intelligence analysis shows that at the end of 2023, slightly more than 54% of American TV users have it connected.
This time, though, investors appear to be preparing for the worst. Following the initial reporting of talks between Walmart and Vizio in The Wall Street Journal, Roku’s share price dropped over 9% last week, and it lost another 6.6% on Tuesday. Over the past week, Roku’s market value has dropped by around one-third due to a combination of factors, including a steep selloff in the stock on Friday after the company reported its fourth-quarter results.
That might be too much for a business that has transformed into the go-to portal for 80 million streaming subscribers. The so-called streaming war has cooled down on the platform side, while supply and cost challenges on Roku’s hardware side have significantly hampered its growth recently.
The introduction of new streaming services including Disney+, Peacock, HBO Max, and Paramount Plus from 2019 to 2021 was a boon to Roku’s platform business. The parent businesses of these services utilized Roku’s platform to promote their products and ran advertisements. Streamers’ reliance on Roku’s services plummeted as investors quickly lost faith in its growth-at-all-costs approach. After growing at a rate of 67% each year for the preceding five years, the company’s platform revenue only increased by 10% in 2023.
Wall Street is concerned that Roku may find it much more difficult to recover its growing momentum in the face of the arrival of another huge competitor. Merging with Vizio “would signal a greater focus by Walmart on owning the living room and building its broader media business,” according to a study last week by Ben Swinburne of Morgan Stanley. The acquisition was deemed “a significant challenge for Roku” by MoffettNathanson analyst Michael Nathanson, who noted that Walmart is a major distributor of Roku TVs.
In a note to clients, Oppenheimer analyst Jason Helfstein predicts that Roku’s stock will underperform “until the company sustainably delivers high-teens Platform revenue growth.” He did not specifically address the Vizio deal, but downgraded the stock to neutral following last week’s results. The time has come for Roku to prove that not even Walmart can contain it.
