The Gatekeeper of the Streaming World

December 5, 2019

*ROKU was added to our Top Picks on 02-Jan-2019 for $32.52. As of this writing it is trading at $150, up 361.25%.

In the future, there will be tens of thousands of new streaming apps, much like the app store in an iPhone or a Samsung.

That’s why we are so bullish on Roku. Because we believe it can be the operating system (platform) that will power all those new apps.

In today’s digital economy, gatekeepers are the kingmakers, and Roku can become just that – the gatekeepers to the streaming universe.

There are only a handful of companies which by themselves can thrust cord-cutting and streaming into a new gear. Disney is one of those companies.

When Disney announced the release of the Disney+ – for a mere $6.99/month – the streaming world was turned upside down.

That eye-popping discount sent shock waves down the spine of Netflix, which had just gone through yet another round of price hikes- resulting in the first loss of subscribers in the U.S. in many years.

While the loss was small, the whole investing world stood up and took notice.

Disney is a content juggernaut - from Star Wars, Marvel, Fox, FX, and the Simpsons to all of ESPN and the sporting world and so much more, including Hulu, which they now own outright. If Disney is pricing its product that low, Netflix subs will swallow hard, in time, to justify that payment.

But we don’t care about Disney — we care about Roku. Because Disney means more streamers, and more streamers mean more people on Roku.

Except for one thing…


Over the last few months, Disney has been clashing with Amazon. And right now, Disney will not be available on Amazon devices.

Now, a deal may happen at the last minute to mend fences with Amazon. But what happens if this holds?

Here, I’ll answer it for you — some people will switch to Roku — they will have no choice.

But for Amazon, the problems go much deeper.

Amazon is not just an operating system and gatekeeper for streaming (the Fire Stick), it is also a competitor with Roku for the content.

In fact, Amazon Prime may be the second most powerful streaming service behind Netflix. Amazon spends billions of dollars on original content, and they have no intention of slowing down.

In a WSJ story, we learn that Amazon wants to sell ads on Disney apps, such as the ESPN streaming app, in exchange for carrying Disney+ and other Disney apps on the Fire device.

In fact, the WSJ reads: “Amazon is pushing for the right to sell a substantial percentage of the ad space on Disney.”

Amazon is not agnostic in this race, and it is inevitable that they’ll rub other content providers like Disney and Apple the wrong way.

Contrast that with Roku, which is 100% agnostic. With no content creation arm, Roku is simply a neutral gatekeeper while goliaths like Apple, Amazon, and Disney spend billions on content to try and get subscriptions and eyeballs. It’s a content arms race like nothing we’ve ever seen, and Roku is positioning themselves in the most enviable position – the neutral gatekeeper.

Disney+ is set to launch on Nov 12th, and in reality, it will likely make a deal with Amazon, but this narrative of Amazon’s lack of neutrality is spilling over to other places as well.

More Evidence of Confusion in the Streaming World

The WSJ reported that Disney won’t allow its TV networks, including ABC and ESPN, to carry advertising for Netflix. Disney will immediately be a major Netflix competitor because of Disney’s huge content library, and again we see these conflicts of interest between major players in the streaming arms race.

While those two juggernauts duke it out, we are again left with the beautifully agnostic Roku. Roku will be happy to carry Netflix ads. Recall that Roku’s platform revenue (which includes ad spend) was up a staggering 86% last quarter (year over year).

As the streaming wars heat up, as it goes from whispers to outright cantankerous competition, Roku will win, and it will win by a lot. Roku struck gold when it announced that it will also allow customers to access the pending Apple TV+ service when it goes live next month at another eye-popping price – just $4.99/month.

Apple, like Disney and like Amazon, is spending billions of dollars on new content, and while Apple is trying to push its own OTT devices, making nice with Roku from the beginning is a clear nod to Roku’s seat at the head of the table.

Apple TV+ will be available in all Roku-enabled televisions, as well as the company’s set-top boxes. So, an astonishing windfall of content is coming our way, and Roku is destined to maintain its market share lead going forward as the cord-cutting revolution enters a powerful new phase.

Joshua M. Belanger
Joshua Belanger is founder of CounterVest and the editor of Hot Money Trader. He has been providing ordinary investors blockbuster returns since 2008. In 2018, the average return of Hot Money Trader beat the markets by over 15%