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ROKU Forges Deal With AT&T's WarnerMedia to Stream HBO Max

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Zacks Equity Research
·4 min read
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Roku ROKU recently struck a deal with AT&T T owned WarnerMedia to give Roku users access to HBO Max streaming service, which will now be available on Roku devices beginning today. The terms of the deal were not disclosed.

Roku users can download the HBO Max app from the Roku channel store. The ones who have already subscribed to HBO through Roku will have the existing HBO app on their devices automatically updated to the HBO Max app.

The two companies had hit a deadlock since HBO Max was launched in May over the financial terms for Roku to carry the streaming app. Markedly, in exchange for hosting an app with advertising, Roku typically takes 30% of the ad inventory to sell on its own.

Markedly, Comcast CMCSA owned NBC Universal and Roku had been previously locked in negotiations for months over Peacock streaming app before they struck a deal in September.

These standoffs have been a sign of how Roku, which has about 46 million active users, is flexing its muscles as the largest platform in the United States for aggregating streaming services.

Notably, Roku and Amazon AMZN together control about 70% of the U.S. streaming-device market, limiting the growth of any video apps that are not available on their distribution platforms.

Roku’s stock has returned 157.2% on a year-to-date basis, outperforming the Broadcast Radio and Television industry’s rally of 30%.

Year-to-Date Performance

HBO Max 2021 Movie Releases to Attract Roku Users

Roku users' demand to have access to HBO Max is expected to have intensified after AT&T announced its plans to skip the box office in 2021 and release its major movies directly on the streaming platform in the United States.

Resultantly, 17 brand-new movies will be coming to the service, which include films like Godzilla vs. Kong, Dune, Matrix 4 and the next installment of Suicide Squad.

The move follows Wonder Woman 1984 debuting on HBO Max the same day as it is released in theaters on Dec 25. Typically, HBO Max users would have to wait three months after a movie’s release before having access to it.

AT&T will benefit from the most popular streaming platform (in terms of time spent) in the United States to make Wonder Woman 1984 a success on HBO Max, which had around 12.6 million active subscribers as of early December.

Likewise, Roku couldn't risk alienating DC fans who might pick up an alternative such as Amazon’s Fire TV to watch Wonder Woman 1984. Markedly, in November, the HBO Max app arrived on Amazon Fire TV devices.

New Content to Boost Streaming Device Sales

Roku is benefiting from increasing demand for Roku devices, backed by an expanding lineup of streaming products and content partnerships ahead of the holiday season.

In the third quarter, player revenues (29.3% of revenues) increased 62.3% from the year-ago quarter’s levels to $132.4 million. Player unit sales were up 57% year over year, resulting in the strongest year-over-year player revenue growth in over seven years.

Roku introduced a redesigned version of its top-of-the-line Ultra player, which, for the first time, adds Dolby Vision support as well as Bluetooth alongside an all-in-one Roku Streambar priced at $129.99.

Additionally, the company is launching several content promotions to boost sales of Roku streaming devices ahead of the holiday season. Apple’s streaming platform, Apple TV+, available at $4.99/month, is free for three months to eligible customers who purchase and activate a Roku device from Oct 23, 2020 to Jan 31, 2021.

Moreover, the Roku Channel has been expanding its free live and linear channel lineup in the United States with new channels. These include VENN, Cinedigm’s Bloody Disgusting TV, the Craftistry from Studio71, Circle, HappyKids.tv, Hi-Yah! – The Martial Arts Channel, iFood.tv, the Lego Channel, Maverick Black Cinema, MovieSphere, Skills + Thrills, and WeatherSpy.

In addition, this Zacks Rank #3 (Hold) company and NBCUniversal renewed their agreement to keep 46 NBCU broadcast and cable apps on the Roku Channel in September.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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