Stream A Little Stream Of Me
It’s almost as predictable as the sun rising in the east. A company experiences revenue and profit surges, and the next thing you know, they start expanding into areas in which they have no business. They think their brand name is golden and bulletproof, able to be transferred across multiple platforms.
It’s just that things seldom end well when companies do this. The latest example is from Roku, the streaming services provider that just announced it has gained exclusive retail distribution with Best Buy of its own line of branded smart TVs and sound bars. The company has also sold its streaming device (a remote control and tiny wireless receiver mounted on or near the TV).
Historically, Roku’s profits stem from ads sold in the streaming end of its business. Even the small, inexpensive hardware devices, which are necessary in many cases for accessing Roku content, are not profitable. And now it plans to venture into even bigger hardware items.
Much bigger. The logic is really no different from if a major car manufacturer, realizing that many people eat while driving, sought to buy a fast food chain because…well, you get the picture. Or in the old days when people paid with checks, the old adage I used to see in restaurants (something like this): “We have a deal with the bank. They don’t sell hamburgers, and we don’t accept checks.”
Amazon has made this mistake through the years, thinking it could leverage its mighty name onto smartphones and televisions as well. While it has done well with its own tablet device as well as home assistants, it has not done well in other categories. Often the better part of brand maintenance is just sticking to your knitting, and making sure it is the best knitting possible.
Imagine a world in which Netflix decided to launch its own TVs and sound bars. We would laugh. Or if Spotify had its own ear buds. I could go on.
This is not to say that companies should not do anything of this sort, because there have been some success stories. It’s that in many cases, the brand name is big in one area, but not so big as to translate into global dominance. Roku is one among many streaming services, and while its ad revenues far surpassed $1 billion last year, they are still not a household word. Amazon, which is, still doesn’t have the brand power to just waltz into anything it so desires.
And then there is the nagging truth that Roku isn’t actually manufacturing any of these new devices. They will be made by Westinghouse and HiSense, both very common low-end brands available everywhere. These are nothing special, and are really just private label products contract-manufactured for Roku. When it comes to my home theatre experience, I opt for more reliable brands.
I’m betting that Roku (and Best Buy, who for some reason agreed to go along with this) will be disappointed in sales and profits in the years ahead. Roku is a streaming service, and it should stick to that knitting. Its small money-losing hardware device is mere gateway to the service, and is something that they have to absorb as a matter of gaining eyeballs. But TVs and sound bars are quite another thing. The last company I would think of for new electronics is Roku.
And here we are, companies making the same mistakes over and over, the kinds of things that wind up in future Marketing text books. You’d think they would learn from the mistakes of others. Apparently, though, successful knitting wasn’t good enough. And the sun will set in the west soon enough on them.
Dr “Have A Great Spring Break—See You In A Week“ Gerlich
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