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Roku is Positioned to Win

Numbers Chapter 6, Verses 24-26:


"The Lord bless you and keep you;

the Lord make his face shine on you

and be gracious to you;

the Lord turn his face toward you and give you peace."


So some of you may have seen the news, if not, Sharp will sell smart TVs integrated with Roku, Inc. (ROKU) streaming capabilities in the U.S. beginning in spring 2022. For those unaware, its been six years since Sharp has sold TVs to American consumers. The plan is to include 50- to 75-inch LCD TVs with superhigh-definition 4K displays.


Roku initially held an exclusive agreement with TCL that began around six years ago ironically, that went from a nothing-burger to the top Smart TV spot in North America. At the same time more recently, this exclusive agreement has been ended with TCL's complaints of an unfair agreement driving the divide. Both Amazon, Inc. (AMZN), and Alphabet, Inc.'s (GOOG) Google unit are targeting using TCL as a distributor of their streaming systems.


All of this has been a big FUD in dropping Roku's SP from the $470 range in late-July all the way down to below $300 in early-October. But what really matters is that Roku's operating streaming system is the leader in the U.S., and is poised to grow globally. FUD regarding the TCL exclusivity breakup is misguided as with Amazon and Google lurking, other TV manufacturers like Samsung, Sharp notably, may shift further to Roku.


All this simply re-emphasizes the fact that the TV manufacturers are not as important as Roku, or streaming platforms. In fact, I wouldn't be surprised to see Roku take Sharp to a leading position as it fazes out TCL - I don't see the same future for companies like Amazon and Google who simply cannot compete against Roku's agnostic approach.


Today's market sure liked the news, but for savvy investors, this was inevitable once the exclusive agreement with TCL was announced. Roku has time and time again proved that it has some very strong pull when it comes to dealing with major content originators for distribution and advertising agreements. Working with a new entrant like Sharp is smart in that Sharp needs Roku much more than Roku needs Sharp - I'm sure that there are multiple TV manufacturers eager to work with Roku.


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