Apple (NASDAQ:AAPL) is apparently hungry for real estate on your Roku (NASDAQ:ROKU) remote. Shares of Roku moved higher on Wednesday after screenshots showed the remote for the high-end Roku Ultra streaming device replacing a Sling TV button with one for the Apple TV+ service.
The market’s initial reaction — up 4.3% on Wednesday — may seem like an overreaction. We’re talking about a roughly $250 million bump in market cap just because one of the four branded buttons on the bottom of a remote changed. We don’t know what Apple TV+ is paying for the one-push access, but you can be sure that it’s not much if anything more than what Sling was sending Roku’s way.
The market excitement here with the move of an Apple TV+ button on the updated remote is more about validation of Roku by what was once seen as one of its three main competitors. Roku has arrived. The stock may have given back all of Wednesday’s gains the following day, but it’s still one more reason why you don’t want to bet against Roku.
Pushing the right buttons
If you’re like me — with a collection of different Roku remotes — you’ll be quick to notice that buttons change pretty often. Netflix (NASDAQ:NFLX) always commands the prime position of the first of four service-branded spots. Netflix probably doesn’t have to pay for that visibility, and Roku in the past has said that it generates negligible marketing revenue from Netflix.
Roku and Netflix go way back. Roku founder and CEO Anthony Wood was even working at Netflix on a streaming device before Netflix decided it didn’t want to get into the hardware/platform space. The Netflix Player was nixed, and the team led by Wood was spun off. It’s how Roku was born.
Everyone else probably has to pay. Looking at some of my remotes I see Fandango Now, Vudu, Pandora, and other second-tier services that certainly didn’t earn the right to be there. Some of them may not even be around anymore. Apple TV+ certainly classifies as a second-tier service at this point. It may have launched in late 2019 with a star-studded lineup, but the thin library of content and the likely sharp drop in subscribers after Apple device owners with a free year of access hit the renewal paywall are momentum killers.
There aren’t a lot of people talking about Apple TV+ as an ascending service. Roku, on the other hand, is on the rise. It’s in 53.6 million homes, growing by roughly 1 million additional users with every passing month. There are thousands of apps available on Roku, and it makes decent money getting services to pay up for enhanced visibility on the hub — and also on the remote itself.
Apple TV+ needs visibility. Roku competes against tech giants with its platform, and that includes the Apple TV set-top device. It’s humbling for the class act of Cupertino to advertise on a rival’s handheld device, but it also keeps Apple TV+ alive as a brand in Roku homes. There’s no denying now that Roku is one of the market’s top media stocks. Apple seems to think so, and if you don’t see it that way the counter to that argument could be right in your hands the next time you spring for a Roku player.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.
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