Roku's boxes offer thousands of channels -- but viewers are largely just tuning in Netflix

Reed HastingsFlickrNetflix CEO Reed Hastings has to be happy about how dominant his service is on Roku boxes.

Roku’s first streaming media device was so closely linked to Netflix that it was called the Netflix Player.

Nine years later, the electronics company is still pretty closely linked to the streaming media giant.

Netflix is the most watched service on Roku boxes. About a third of the 6.7 billion hours Roku box owners spent streaming video through their boxes in the first half of this year was spent watching Netflix, Roku said in a regulatory document filed Friday that represented its first step toward a public offering of shares. Netflix accounts for the same proportion of hours watched through Roku boxes in 2016, the electronics company said.

Roku’s contract with Netflix that allows it to stream Netflix videos through its boxes is in its final year, the company warned potential investors. Although Roku expects the contract to be extended or renewed, there’s no guarantee.

When consumers sign up for service on Netflix through a Roku box, Roku gets a commission. Revenue from such sales aren’t significant for its business, the company said. But given the popularity of Netflix, Roku could see a hit to its box sales if it no longer could offer the service.

“If we are unable to renew such agreements on a timely basis, we may be required to temporarily or permanently remove certain content from our platform. The loss of such content from our platform for any period of time may harm our business,” Roku said in the filing.

A shared history with Netflix

Although Roku touts the fact that it offers consumers access to thousands of channels through its boxes, a small handful of providers account for the vast majority of video watched on Roku boxes. In the first half of this year, the five most-watched streaming channels available on Roku’s boxes — which includes Netflix — accounted for 69% of all the hours spent watching video on the devices. Roku didn’t disclose the other channels in its top five, but did say that YouTube is its most watched ad-supported channel.

“We depend on a small number of content publishers for a majority of our streaming hours, and if we fail to monetise these relationships, directly or indirectly, our business could be harmed,” Roku said in its regulatory filing.

Roku’s ties to Netflix run deep. Netflix was an early investor in the company, and the only channel available on Roku’s original digital media player was Netflix, thus its name. On the remote control that ships with current Roku players, there’s a button that allows users to instantly access Netflix.

From April 2007 to January 2008, Anthony Wood, Roku’s CEO, was the vice president of internet TV at Netflix — even while serving as Roku’s chairman and CEO. Neil Hunt joined Roku’s board of directors in August, one month after stepping down as Netflix’s chief product officer.

Additionally Roku subleases office space in Los Gatos, California, from Netflix.

Roku is nominally seeking to raise as much as $US100 million in its initial public offering.

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