Roku launches its own channel featuring free, ad-supported movies

Sarah Perez

Roku, a company capitalizing on the cord cutting trend to the tune of a $100 million IPO, is today launching its own channel for users of Roku streaming players, sticks and TVs, which will connect customers to hundreds of movies and some TV shows they can stream for free. The channel itself will include content Roku has licensed directly from studios, as well as movies aggregated from other channel publishers on its platform.

Like its rivals - Apple TV, Chromecast and Amazon Fire TV - Roku offers an easy way to access all the top streaming services, as well as many of the niche players. However, unlike the other competitors, Roku hasn't really used its platform as a way to push its own video marketplace or streaming service the way Apple does with iTunes, Google with Google Play Movies & TV, and Amazon does with Amazon Video and Prime Video.

That's now changing with today's launch of "The Roku Channel," as the new service is called.

Roku's previous channels -  “Roku Recommends," launched in 2011 and “4K Spotlight," launched in 2015 - were curated selections of video content.

With "The Roku Channel," however, some of the movies included come from licensing deals Roku has made with studios like Lionsgate, MGM, Paramount, Sony Pictures Entertainment and Warner Brothers. But many other titles are being aggregated from Roku's existing channel publishers, including American Classics, FilmRise, Nosey, OVGuide, Popcornflix, Vidmark, and YuYu. The company expects more publishers to participate in time.

At launch, Roku users will be able to browse through a selection of hundreds of Hollywood hits which can be streamed at no charge because the content is supported by ads.

The channel includes well-known films and franchises like Ali, the Legally Blonde movies, The Karate Kid, Up in the Air, and more.

The video content is organized in a fairly standard format. There are rows of titles to browse through, with a featured selection of curated titles at the top, then others below organized by genre.

It's not necessarily clear to Roku users where the movies come from, though - that is, if it's from an existing channel found elsewhere on Roku. There's no branding that says the movie is a "Popcornflix" title, that is, nor would clicking the movie redirect users to the Popcornflix channel to launch the video stream.

Instead, the movies will just begin to play, making the experience more seamless for customers.

However, the participating channels do have something to gain, if not exposure - advertising revenue.

Roku says its own in-house ad sales team is in charge of selling ads against the content on "The Roku Channel;" and while the company declined to detail what the rev share is with its publisher partners, it's clear that one exists.

Also of note, Roku says it wants to make watching ad-supported movies less painful than on other streaming services or traditional TV.

"The main things were focused on is limiting the commercial breaks, and the timing and placement," explains Roku CMO Matthew Anderson, of how Roku designed the ad experience on The Roku Channel. "We're looking at some of the things that have frustrated viewers in the [over-the-top] environment either on or off the Roku platform, and we've tried to take those away," he says.

That means the ads will be smartly placed with respect the content they interrupt, for example, and Roku won't annoyingly repeat the same ads over and again, which drives viewers crazy.

And Roku will have half as many ads as on linear TV - a place where you'd normally find 16 minutes of commercial breaks per hour, on average.

The ads will also be somewhat personalized, if the advertiser chooses.

"We've built up a pretty significant advertising organization, both from the standpoint of handling ad sales, but also from the standpoint of all the ad operations and ad tech that goes into a service like ours," notes Anderson.

Roku knows its customers' zip codes and can make other determinations about users based on streaming behavior to assign them to a group for ad targeting purposes, he explains.

For instance, a Roku user that loaded a lot of kids' channels is probably a parent.

Advertisers can then customize which ad is shown based on these demographics and other factors, but they're not able to gain access to personally identifiable information, Anderson says.

For Roku, having its own ad-supported service could help boost its revenue. Today, the company has 15.1 million monthly users, up from 4.8 million three years ago, and is generating $11.22 in service revenue per user. Its users are streaming more content than ever, too - quarterly, they stream 3.5 billion hours, up 60 percent from last year. And eMarketer says Roku is now the most popular streaming platform in the U.S.

However, until today, most of what users stream on Roku comes from channels that don't impact Roku's bottom line. Roku has over 5,000 channels, but in its S-1 filing, it said Netflix accounts for a third of its streaming hours. Netflix doesn't add to Roku's revenue; nor does Roku's most popular ad-supported service, YouTube.

The Roku Channel may not ever overtake either of these two streaming giants in terms of viewers, but it could help the company leverage its own growing user base and their hunger for free streaming options.

The Roku Channel launches today on Roku players and Roku TVs in the U.S. The channel will gradually become available on current generation Roku devices through a phased roll out over the coming weeks, Roku says.