Roku predicts that within four years, half of all U.S. homes will have never had cable TV or will have canceled their subscription, the company said in a letter to investors on Thursday released along with the company's fourth quarter 2019 results.
The consumer shift from expensive cable TV packages to cheaper and more flexible "over-the-top" internet streaming services has been driving a wave of investment and competition in the media industry.
For example, Comcast's NBCUniversal is launching a service called Peacock soon, and AT&T's WarnerMedia is planning an additional service under the HBO brand name. Other giants such as Apple, Disney, and Netflix are investing billions in new shows and movies for their services, too.
Roku sees this proliferation boosting its business, which it frames as being a "neutral partner at the center of the streaming ecosystem." It sells software and hardware that enables consumers to stream internet video on their televisions, as well as advertising services.
"Moreover, new services and the growing investment in original programming that is exclusive to streaming are enriching the [over the top] experience," Roku said in the letter to investors. "This is driving more viewers to spend more time streaming and less time in traditional pay TV, and many consumers are leaving the legacy pay TV ecosystem entirely. We predict that by 2024 roughly half of all U.S. TV households will have cut the cord or never had traditional pay TV."
73% of U.S. households had a cable or satellite TV subscription in 2017, according to the National Telecommunications and Information Administration.
Roku stock rose 7% in extended trading after announcing earnings on Thursday. Roku said that revenue was up 49% in the fourth quarter to $411.2 million, and it has 36.9 million active accounts. However, Roku reported a net loss of 13 cents per share.
Disclosure: Comcast owns NBCUniversal, the parent company of CNBC.
