Roku to cut 200 U.S. jobs, citing weak ad market
Roku, the San Jose-based tech company that rapidly expanded during the COVID-19 pandemic, on Thursday said that it plans to cut 200 U.S. jobs, citing “current economic conditions.”
The company, which sells connected TV hardware and advertising on its streaming platform, said the layoffs will be “substantially complete” by the end of its first quarter, according to a document filed with the U.S. Securities and Exchange Commission on Thursday.
A Roku spokesperson did not immediately respond to a request for comment.
The job cuts come as more entertainment and tech companies are looking to slash costs in an increasingly uncertain economic environment. Facebook parent Meta is laying off 11,000 employees — or 13% of its workforce — and Amazon plans to eliminate as many as 10,000 jobs.
In a letter to shareholders earlier this month, Roku Chief Executive Anthony Wood discussed the difficult climate. Ad spending on Roku’s platform grew more slowly than its earlier forecast in part because of weakness in the TV ad market, Wood wrote.
“As we enter the holiday season, we expect the macro environment to further pressure consumer discretionary spend and degrade advertising budgets, especially in the TV scatter market,” Wood wrote. “We expect these conditions to be temporary, but it is difficult to predict when they will stabilize or rebound.”
Disney+ is growing, but Disney’s streaming business is losing billions of dollars a year. Cost cuts were signaled during this week’s earnings announcement.
Wood said the company expected its fourth-quarter revenue to be $800 million, down from $865.3 million in the fourth quarter of 2021.
Roku employed 3,000 employees globally as of Dec. 31, 2021.
During the COVID-19 pandemic, the company expanded its presence in Southern California as it grew its catalog of original content, doubling the size of a Santa Monica team to more than 200 employees last year.
Roku is best known as a platform where consumers can connect with various streaming services, including its own free ad-supported Roku Channel.
The company gets a cut of subscriptions or programs sold through its platform and also makes money selling ads across its platform and on its free streaming channel.
Roku also sells hardware, including connected TV devices and smart home products such as security cameras.
As popularity for the ad-supported Roku Channel has grown, San Jose-based Roku more than doubled its staff in Santa Monica last year.
Some analysts have expressed doubts about Roku’s business model.
In a note titled “Roku Appears Broku,” Jeffrey Wlodarczak, a principal at Pivotal Research Group, wondered whether executives overplayed their hand with large advertisers when Roku saw a surge in business during the pandemic as consumers flocked to streaming services.
“Our view is the TV/digital ad backdrop is not great, but there appears to be something specific going on at ROKU that seems to have significantly exacerbated the problem,” Wlodarczak wrote. He has a sell rating on the company’s stock, which closed Thursday at $56.41 a share, down 0.8%.
Other entertainment companies have also taken steps to downsize. Last week, Disney CEO Bob Chapek said the company is implementing a hiring freeze and anticipates staff reductions. Warner Bros. Discovery, Netflix and other media companies have also shed jobs.
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