What changed in this filing

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Item 1. Business

2021-02-26 compared with 2020-03-02 · 155 added, 108 removed, 83 unchanged (76% of the section changed)

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by hours streamed.

Our active accounts increased to 36.9 million at December 31, 2019, and our users streamed 40.3 billion hours of content during 2019.

We pioneered streaming to the TV and were founded on the belief that someday all TV content would be streamed.

The re-platforming of the TV ecosystem from traditional linear TV distribution and legacy pay TV services that started when early adopters began embracing TV streaming has gained momentum rapidly and is creating even more opportunities for consumers, content publishers, advertisers and other industry participants.

Over the last year, many of the biggest names in media and TV programming embraced the transition to streaming resulting in the launch of new TV streaming services, growing investment in original content that is exclusive to streaming, and more ad-supported TV viewing options.

As TV streaming has become mainstream, consumers are spending more time watching TV streaming services, with many leaving legacy pay TV services entirely.

We believe that as the shift to TV streaming continues, advertisers looking to reach and engage streaming audiences will take advantage of the benefits inherent with digital advertising capabilities available in TV streaming and will re-allocate their budgets accordingly.

We are capitalizing on this large and growing economic opportunity.

Our mission is to be the streaming platform that connects the entire TV ecosystem.

Through our TV streaming platform, we are focused on connecting users to the streaming content they love, enabling content publishers to build and monetize large audiences, and providing advertisers with unique capabilities to engage consumers.

We pioneered streaming to the TV and were founded on the belief that all TV content will be streamed.

The re-platforming of the TV ecosystem is underway and is creating more options for consumers, content publishers, advertisers and other industry participants.

TV streaming is now mainstream and consumers are spending more time watching TV streaming services, with many ‘cutting the cord’ from legacy pay TV services entirely.

Over the past several years, many of the biggest names in media have transitioned toward streaming offerings and similarly, advertisers looking to reach and engage with streaming audiences are increasingly taking advantage of the benefits inherent to the digital advertising capabilities of TV streaming platforms and are re-allocating their budgets accordingly.

These trends continued to gain momentum in 2020 as consumers spent more time at home due to the COVID-19 pandemic.

Our mission is to be the streaming platform that connects the entire TV ecosystem of viewers, content publishers and advertisers.

Through our TV streaming platform, we are focused on connecting consumers to the entertainment they love, enabling content publishers to build and monetize large audiences, and providing advertisers with unique capabilities to engage consumers.

Central to our platform is the Roku operating system (the “Roku OS”).

The Roku OS is purpose built for TV to run on low-cost hardware which enables us to manufacture and sell affordable streaming players.

The Roku OS is purpose built for TV and designed to run on low-cost hardware which allows us to manufacture and sell streaming players that are affordable.

The Roku OS also powers Roku TV models that are manufactured and sold by our TV brand partners who license the Roku OS and leverage our smart TV hardware reference designs.

We also license the Roku OS and our streaming player designs, and provide ongoing technology and support services, to certain international service operators that distribute Roku Powered players to their subscribers.

All Roku devices – Roku streaming players, Roku TVs and Roku Powered streaming players – enable users to access a wide selection of content by connecting their Roku device to our streaming platform via a home broadband network.

The Roku OS provides much of the core functionality of Roku devices, integrates our streaming software, user interface and advertising technology, and provides content publishers and advertisers with access to our billing services and data insight tools.

The features and functionality of our platform along with the Roku OS enable us to address the needs of our users, content publishers, advertisers, Roku TV brand partners and other licensees.

We continue to invest significant resources to advance the Roku OS and to provide an industry-leading platform for our users, content publishers and advertisers.

Roku TV models and Roku streaming players enable consumers to access a wide selection of content by connecting their Roku device to our streaming platform via a home broadband network.

The features and functionality of our platform, powered by the Roku OS, enable us to address the needs of our consumers, content publishers, advertisers, Roku TV brand partners, and other partners.

Consumers can discover and access a wide variety of streaming content, content publishers can reach our highly-engaged user base of over 50 million active accounts and utilize our billing services and data insight tools, advertisers can serve targeted and measurable ads to the TV viewers that they want to reach, Roku TV brand partners can build market share by offering high performance smart TVs in a range of sizes and price points, and retailers can offer customers Roku’s highly-rated streaming devices on-line and in stores.

We continue to invest significant resources to advance the Roku OS;

to provide an industry-leading platform for our consumers, content publishers, and advertisers;

and to extend Roku’s advantage as the streaming decade continues.

Our Business Model

Three core activities drive our business model.

We focus on increasing the number of active accounts that use our streaming platform to watch TV, increasing user engagement and growing the hours of content streamed, and growing our revenue and gross profit by monetizing user activity on our platform.

To increase the number of active accounts on our platform, we sell stand-alone streaming players, we work with TV brand partners who license the Roku OS to manufacture and sell Roku TV models, and we also license the Roku OS to certain service operators.

These various account acquisition paths allow consumers to access the Roku platform in multiple ways.

Our Roku TV licensing program has experienced strong growth and for the year ended December 31, 2019 nearly 1 in 3 smart TVs sold in the United States was a Roku TV.

To attract and retain active accounts, we also invest significant resources to improve the user experience on our streaming platform.

This includes improvements to our navigation functions and search and discovery feature as well as increasing the depth

and breadth of our content offering and enhancing the overall streaming experience.

In 2019, we increased our active accounts by 9.8 million to reach 36.9 million active accounts at year end.

We believe that offering users a wide range of content and running more relevant display and digital ads enhances the user experience on our platform and drives increased user engagement by delivering a better overall streaming experience.

We offer our users a rich content selection that is easy to find and discover, and we seek to run relevant digital ads on our platform that enhance the user’s experience.

We enable our content partners to publish streaming channels, quickly and easily, which makes us an attractive platform for content publishers to partner with as they seek to reach TV streaming, or over-the-top (“OTT”), users.

Streaming hours on our platform have grown from 24.0 billion hours in 2018 to 40.3 billion hours in 2019, as we have grown active accounts through the distribution of streaming players and Roku TVs, and as our active accounts stream more hours per day, on average.

While the number of hours streamed on our platform reflects our popularity and brand affinity, it does not correlate to platform segment gross revenue or the average revenue per user (“ARPU”) on a period by period basis.

We generate revenue by monetizing our users’ engagement on our platform through a variety of services and capabilities, including video advertising in ad supported channels, sales of subscription services and other commerce transactions, brand sponsorship and promotions, and billing services.

We measure monetization of our platform by calculating the ARPU, which we believe represents the inherent value of our business model, and growth in gross profit.

In 2019, ARPU (which we measure on a trailing twelve-month basis) increased from $17.95 to $23.14 and gross profit for the full year grew from $332.1 million to $495.2 million.

Serving the Needs of our Users, Content Publishers, Advertisers and other Industry Participants

Our business model is designed to addresses the needs of the participants in the TV streaming ecosystem.

Through our streaming platform and our streaming devices, we make it easy and affordable for our users to watch their favorite TV shows and movies, as well as listen to streaming audio.

We believe our platform offers users an incredible streaming experience through a user interface that is easy to use and navigate.

From the Roku home screen, our users can access the 500,000+ free and paid movies and TV episodes including live TV, news, sports, hit movies, popular shows and more that are available from thousands of channels on our streaming platform.

Roku’s powerful cross-channel search capabilities make it simple for our users to find TV episodes, movies and other content across a wide variety of channels.

Users are able to control the amount that they spend on streaming content by choosing content that is available on an ad-supported, subscription or transactional basis.

Our direct relationship with our users provides us with detailed insights about our users and their behavior on our platform, including the channels that they install, the content they search for, the channels they watch, and certain content that they purchase or subscribe to on our platform.

Our first party data enables us to develop actionable insights such as unbiased search results and content recommendations to improve our users’ experience.

Three core areas of focus define our business model.

First, we build scale by increasing our active accounts.

Second, we increase engagement by growing the hours of content streamed through our platform.

And third, we monetize the activities that consumers engage in through our platform.

Furthermore, our business model is designed to fulfill the needs of the participants in the TV streaming ecosystem:

consumers, content publishers, advertisers, TV OEMs, other device licensees and consumer electronics retailers.

Increasing the number of active accounts

We make TV streaming affordable by offering a lineup of stand-alone streaming players that connect to a user’s TV.

Released in the fall of 2019, our current streaming player lineup has manufacturer suggested retail prices ranging from $29.99 to $99.99.

We also partner with TV brands that manufacture and sell co-branded Roku TV models.

Furthermore, to enhance our users’ experience and to provide a better audio experience we also offer our Roku wireless speakers that connect to a Roku TV, Roku Smart Soundbars with a streaming player built in that enables the soundbar to connect to our streaming platform, and wireless Roku Wireless Subwoofers.

Content Publishers

We enable content publishers to build audiences and monetize their content on our streaming platform.

Content publishers can deliver content directly to our large and relevant audiences and reach those users who no longer use or those who never used linear TV or paid TV subscriptions.

Furthermore, to enhance our users’ experience and to provide a better audio experience we also offer our Roku Smart Soundbars and Roku Streambars, each with a streaming player built in that enables the soundbar to connect to our streaming platform, Roku wireless speakers that connect to Roku TV models, and our Roku Wireless Subwoofers.

We launch new devices and provide updates via the Roku OS periodically to ensure they offer the highest performance at an affordable price.

We also partner with TV brands that manufacture and sell co-branded Roku TV models that integrate the Roku OS to enable basic TV functions and connect to our TV streaming platform.

We have driven strong growth in our Roku TV licensing program.

Using our reference designs results in relatively low hardware costs, enabling these TV brand licensees to manufacture and sell smart TVs that are competitively priced for consumers and that are automatically updated whenever we issue a Roku OS update.

We also license the Roku OS and our streaming player designs, as well as provide ongoing technology and support services, to certain international pay TV and telco service operators that distribute co-branded players to their subscribers in their markets.

Taken together, we offer consumers tremendous optionality and value when it comes to gaining access to the Roku platform, and combined with the exceptional user experience.

We have been able to significantly scale our active account base over a multi-year period.

In 2020, we added over 14 million active accounts, ending the year with 51.2 million active accounts.

Growing streaming hours

We believe that offering users a wide range of content drives increased user engagement by delivering a better overall streaming experience.

Streaming hours on our platform have grown from 37.8 billion hours in 2019 to 58.7 billion hours in 2020, as we have grown active accounts through the distribution of Roku streaming players and Roku TV models, and as our active accounts stream more hours per day, on average.

Through our streaming platform and our streaming devices, we make it easy and affordable for our users to watch their favorite TV shows and movies, as well as listen to streaming audio.

Furthermore, we believe our platform offers users an incredible streaming experience through a user interface that is easy to use and navigate.

From the Roku home screen, our users can easily find and access the 500,000+ free and paid movies and TV episodes including live TV, news, sports, hit movies, popular shows, and more that are available from the thousands of channels on our streaming platform.

And Roku’s powerful cross-channel search capabilities make it simple for our users to find the entertainment they’re looking for.

Users have the optionality to align their spend to their budget by choosing content that is available on an ad-supported, subscription, or transactional basis.

Our direct relationship with our users provides us with detailed insights about our users and their behavior on our platform, including certain content they search for, the channels they install, the channels they watch, and certain content that they purchase or subscribe to on our platform.

Our first party data enables us to develop actionable insights such as content recommendations to improve our users’ experience.

Content publishers can deliver content directly to our large and relevant audiences and reach those users who no longer use or those who never used legacy pay TV or paid TV subscriptions.

As consumers shift to TV streaming, content publishers that use our platform are able to reach these streaming audiences at scale and engage users directly.

We make it easy for content publishers to distribute and monetize their streaming content through three primary business models, transaction video on demand (“TVOD”), subscription video on demand (“SVOD”), and advertising

supported video on demand (“AVOD”).

The Roku Channel is our own streaming channel that drives user engagement on our platform by providing our users free, ad-supported access to a large library of third-party content that we directly license, in addition to content made available through The Roku Channel by our content publishers.

In this way, The Roku Channel also is intended to help content publishers drive additional viewership and maximize the value of their content on our platform.

The Roku Channel is available in the U.S., U.K.

In 2020, in the U.S., we added a line-up of more than 100 free live/linear channels on the Roku Channel and introduced a new Live TV Channel Guide, offering users a convenient way to discover and watch live TV.

Monetization:

Growing our revenue and gross profit by monetizing user activity

We believe that running relevant display and digital ads enhances the user experience on our platform.

Each individual user on our platform creates multiple revenue opportunities for Roku, whether they’re purchasing content, enjoying ad-supported content or simply opening the Roku home page.

We measure monetization of our platform by calculating the average revenue per user (“ARPU”), which we believe represents the inherent value of our business model, and growth in gross profit.

In 2020, ARPU (which we measure

on a trailing twelve-month basis) increased from $23.14 to $28.76 and gross profit for the full year grew from $495.2 million to $808.2 million.

Our sophisticated and leading streaming platform enables advertisers, including content publishers, brands and agencies, to reach audiences that are no longer reachable or are increasingly unavailable through advertising on traditional TV.

We make it easy for content publishers to distribute and monetize their streaming content through three primary business models:

transaction video on demand (“TVOD”), subscription video on demand (“SVOD”), and advertising-supported video on demand (“AVOD”).

Through our platform we are also able to assist content partners with billing services, including billing customers for in-channel purchases like a movie rental, managing subscriptions and customer invoices.

Roku Pay, our platform billing solution, is a key platform capability that simplifies consumer subscription signups and drives purchase and retention for partners.

Content publishers also have access to our promotional and audience development tools to help them attract and retain viewers.

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Using machine learning, we also can help content publishers target new audiences that are more likely to subscribe to their services.

In 2017, we launched The Roku Channel as our own streaming channel that drives user engagement on our platform by providing our users free ad-supported access to a large library of third-party content that we directly license, in addition to content made available through The Roku Channel by our content publishers.

The Roku Channel provides monetization for both our content partners and Roku through digital advertising.

The Roku Channel also is intended to help content publishers drive additional viewership of their content on our platform by making their content available in The Roku Channel.

The Roku Channel has grown from providing our users with free access to 1,000 movies and TV episodes to over 10,000 hit Hollywood movies, TV shows, news and more and is rapidly becoming one of our leading sources of advertising inventory.

To further drive user engagement, in January 2019, we launched Premium Subscriptions within The Roku Channel, through which we resell ad-free premium content subscription services from providers such as HBO, Showtime, Starz and Epix directly to our users.

In addition to a mix of free and subscription based content, The Roku Channel includes marketing tools that are designed to recruit and retain users.

During 2019, we launched personalized content selection for users and integrated The Roku Channel into our billing services to enable one-click subscriptions.

Using our tools and advertising platform, advertisers are able to leverage our direct relationship with our users, as well as our user data and insights, to serve relevant, targeted advertisements.

The Roku Channel provides our users with free access to over 50,000 titles, including hit Hollywood movies, TV episodes, news channels, and more and is a leading sources of advertising inventory.

Through Premium Subscriptions within The Roku Channel, we resell ad-free premium content subscription services from providers such as Showtime, Starz, and Epix directly to our users.

In addition, we have developed and implemented various features within The Roku Channel that can be used to recruit and retain subscribers for Premium Subscription.

For example, we provide personalized content selection for users and integrated The Roku Channel into our billing services to enable one-click subscriptions.

Advertisers are able to use our platform to leverage our direct relationship with our users, as well as our advertising capabilities and user data and insights, to serve relevant, targeted advertisements.

Advertisers on our platform also can measure both the effectiveness of the ads served and their return on investment.

We also offer engagement analytics such as ad impressions served, click-through rates and video completion rates.

We offer engagement analytics such as ad impressions served, click-through rates, and video completion rates.

We work with a wide variety of third-party measurement companies to measure the branding impact of the ads served and audience demographics, validate ad effectiveness, and quantify sales lift from advertising on our platform.

Furthermore, we have relationships with third-party providers that focus on transactional or point of sale data, which enables our advertisers to compare the effectiveness of ads served on our platform to traditional advertising on linear TV.

Additional promotional advertising opportunities include content sponsorships to give users the opportunity to experience a free movie or show (e.g.

“Family movie night brought to you by…”) and sponsored themes on our home screen.

Additional promotional advertising opportunities include content sponsorships to give users the opportunity to experience a free movie or show and sponsored themes on our home screen.

We also sell branded content rows within The Roku Channel.

Through our recent acquisition of dataxu, we significantly expanded our advertising capabilities to include TV-centric planning and buying toolset, and automated bidding and self-serve software solutions to manage ad campaigns programmatically across digital platforms.

These capabilities, along with our direct relationships with users, growing scale and proprietary first party-data, allow us to provide advertisers with a differentiated and valuable suite of advertising products and services.

Other Industry Participants

Co-branded Roku TV models that integrate the Roku OS that enable basic TV functions and connect to our TV streaming platform are manufactured and sold by TV brands.

Using our hardware reference designs enables our TV brand licensees to manufacture and sell smart TVs that have relatively low hardware costs resulting in TVs that are competitively priced for consumers.

Roku TV brand partners also benefit from licensing the Roku OS because they do not have to develop or update their own operating system and we automatically update our OS on Roku TV models when there is an upgrade.

Under the Roku Powered program, we license the Roku OS and our streaming player designs, as well as provide ongoing technology and support services, to certain service operators that distribute Roku Powered players to their subscribers.

The Roku Powered program has served as our entry point for certain international markets and has resulted in our brand becoming exposed to content publishers in these markets.

In May 2020, we announced the rebranding of the OneView Ad Platform, a single platform leveraging TV identity data to manage advertising across OTT, desktop, and mobile campaigns.

As consumers move to TV streaming, OneView provides advertisers with a toolset to scale their OTT advertising and marketers self-serve capabilities to optimize and measure effectiveness across screens.

OneView integrates the reach, inventory, and capabilities of Roku advertising with the identity and attribution tools of demand-side platform dataxu, which the company acquired in November 2019.

International Markets

We believe that the value our business delivers to participants in the TV ecosystem in the U.S.

— consumers, content publishers, advertisers, TV OEMs, other device licensees, and retailers — is also compelling in international markets.

To date, we have brought the same business model to certain markets that has enabled us to develop the No.

1 TV streaming platform in the U.S.

by hours streamed.

In 2020, Roku TV was the No.

1 selling smart TV operating system in Canada.

Also, in 2020, we launched in Brazil, first in partnership with AOC to bring the AOC Roku TV to consumers and then with the launch of Roku Express, our first streaming device in the country.

In these newer markets, we will continue to focus on building scale, increasing engagement, and ultimately driving monetization.

Sales and Marketing

We engage in a wide variety of sales and marketing activities to drive growth in both our platform and player segments and dedicate significant resources to this area.

We engage in a wide variety of sales and marketing activities to continuously drive scale, engagement, and monetization and dedicate significant resources to this area.

Our sales and marketing activities are primarily focused on building and expanding relationships with content publishers, advertisers, TV brands, retailers and service operators, and driving sales of our streaming players and audio products and Roku TV models to consumers through retail distribution channels.

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(i) agency holding companies and Fortune 500 brands, (ii) independent agency and mid-market clients, (iii) content publishers and entertainment brands, (iv) performance and direct to consumer brands, (v) international markets and (vi) local advertising.

We work with the major ad agencies and holding companies.

We also offer smaller content publishers a self-serve platform to buy promotions and are increasingly incorporating programmatic capabilities into our advertising sales.

Through our recent acquisition of dataxu, we also now provide marketers with a single, data-driven software solution to plan, buy and optimize their ad spend across TV and OTT advertising providers.

Our expanded advertising capabilities include a TV-centric planning and buying toolset, automated bidding and a self-serve software solution to manage ad campaigns programmatically across multiple digital platforms.

We work with TV brands to assist in all phases of the development of Roku TV models, including development, planning, manufacturing and marketing.

Similarly, we work with service operators on the planning and development of their Roku Powered players.

We, together with our Roku TV brand partners, offer consumers low cost, widely available streaming players and Roku TVs and we promote them using a wide range of marketing techniques.

Roku players and Roku TVs are available at retail locations in the United States, Canada, the United Kingdom, France, the Republic of Ireland, Mexico, Brazil and several other Latin American countries.

In the United States, the majority of streaming players, the Roku Smart Soundbar, Roku Wireless Subwoofer and Roku TV models are sold through traditional brick and mortar retailers, such as Best Buy, Target and Walmart, including their online sales platforms, and online retailers such as Amazon.

We also sell our streaming players, Roku Smart Soundbar, Roku TV Wireless Speakers, Roku Wireless Subwoofer and other accessories in the United States directly through our website.

In addition, in some cases, we sell our streaming players to service operators or channel partners who bundle such players with services that they sell to their customers.

We work with our Roku TV brand partners to assist in all phases of the development of Roku TV models, including development, planning, manufacturing and marketing.

Similarly, we work with service operators on the planning and development of their co-branded players.

In the United States, the majority of our streaming players, audio products and Roku TV models are sold through traditional brick and mortar retailers, such as Best Buy, Target and Walmart, including their online sales platforms, and online retailers such as Amazon, and to a lesser extent our website.

We also sell products internationally through distributors and to retailers.

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These three retailers collectively accounted for 69% and 72% of our player segment revenue for the years ended December 31, 2020, and 2019, respectively.

These retailers also sell products offered by our competitors.

We support retailers with an experienced sales management team and work closely with these retailers to assist with in-store marketing and product mix forecasting.

We intend to continue to invest significant resources in our sales and marketing efforts.

We have historically seen seasonality in our business related to advertising and streaming player sales.

Our revenue and gross profit are traditionally strongest in the fourth quarter of each fiscal year and represent a high percentage of the total net revenue for such fiscal year due to higher consumer purchases and increased advertising during holiday seasons.

Furthermore, a significant percentage of our player sales through retailers in the fourth quarter of the fiscal year are pursuant to committed sales agreements with retailers for which we recognize significant discounts in the average selling prices in the third quarter in an effort to grow our active accounts, which will reduce our player gross margin.

Research and Development

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Manufacturing

We outsource the manufacturing of our products to contract manufacturers, using our design specifications.

All of our products are manufactured by contract manufacturers located in the People’s Republic of China and South East Asia.

We outsource the manufacturing of our products to our contract manufacturers, using our design specifications.

All of our products are manufactured by our contract manufacturers in the People’s Republic of China, Southeast Asia and Brazil.

Our contracts do not obligate them to supply products to us in any specific quantity or at any specific price.

Our contract manufacturers procure components and assemble our products to demand forecasts we establish based upon historical trends and analysis from our sales and product management functions.

The contract manufacturers ship our products to our third-party warehouses in California and England where they ship players directly to retailers, wholesale distributors and to end users.

Our contract manufacturers procure components and assemble our products to demand forecast we establish based upon historical trends and analysis from our sales and product management functions.

The contract manufacturers ship our products to our third-party warehouses in California, the United Kingdom and Brazil where they ship players directly to retailers, wholesale distributors and to end users.

Government Regulation

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New laws and regulations in these areas may have an adverse effect on our business.

The costs of compliance with these laws and regulations are high and are likely to increase in the future.

If we fail to comply with these laws, we may be subject to significant liabilities and other penalties.

The costs of compliance with these laws and regulations are substantial and are likely to increase in the future.

Compliance with existing or future laws and regulations, including, but not limited to, those pertaining to internet and online services, data privacy and security, consumer protection, global trade, employee health and safety, and taxes, could have an adverse impact on our business in subsequent periods.

If we fail to comply with these laws and regulations, we may be subject to significant liabilities and other penalties.

In particular, our business is subject to foreign and domestic laws and regulations applicable to companies conducting business using the Internet.

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State and federal consumer protection regulators generally exercise oversight of consumer privacy protections and the security of online services.

California recently adopted the California Consumer Privacy Act of 2018 (“CCPA”), which gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

For example, California recently adopted the California Consumer Privacy Act of 2018 (“CCPA”), which gives California residents expanded rights to access and require deletion of their personal information, opt out of certain personal information sharing, and receive detailed information about how their personal information is used.

The CCPA has prompted a number of proposals for new federal and state privacy legislation.

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Privacy laws also may limit the ability of advertisers to fully utilize our platform, which could have a negative impact on our business.

Tax regulations in domestic and international jurisdictions where we do not currently collect state or local taxes may subject us to the obligation to collect and remit such taxes, to additional taxes or to requirements intended

to assist jurisdictions with their tax collection efforts.

New legislation or regulation, the application of laws from jurisdictions whose laws do not currently apply to our business or the application of existing laws and regulations to the Internet and e-commerce generally could result in significant additional taxes on our business.

An increasing number of jurisdictions are considering or have adopted laws or administrative practices that impose new tax measures, including revenue-based taxes, targeting online commerce and the remote selling of goods and services.

These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result in liability for third-party obligations.

For example, certain countries, including member states of the EU have proposed or enacted taxes on online advertising and marketplace service revenues.

These include new obligations to collect sales, consumption, value added, or other taxes on online marketplaces and remote sellers, or other requirements that may result

in liability for third-party obligations.

For example, Maryland recently passed legislation establishing a tax on certain advertising activities and in certain jurisdictions outside of the United States, including member states of the EU have proposed or enacted taxes on online advertising and marketplace service revenues.

Our results of operations and cash flows could be adversely affected by additional taxes of this nature imposed on us prospectively or retroactively or additional taxes or penalties resulting from the failure to comply with any collection obligations.

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To establish and protect our proprietary rights, we rely on a combination of intellectual property rights, including patents, trademarks, copyrights, trade secret laws, license agreements, confidentiality procedures, employee disclosure and invention assignment agreements and other contractual rights.

As of December 31, 2019, we have over 100 issued patents and 200 pending applications in the United States and foreign countries.

As of December 31, 2020, we have approximately 195 issued patents and 200 pending applications in the United States and foreign countries.

We also license technology from third parties when we believe it will facilitate our product offerings or business.

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Our competitors include:

traditional linear TV distribution and legacy pay TV services;

legacy pay TV service operators;

companies that offer TV streaming devices that compete with our streaming players and Roku TV models and companies that license their operating systems for integration into smart TVs and other streaming products;

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mobile streaming platforms, that enable users to stream content on phones and tablets;

companies that offer content and advertising mediums that are more attractive to advertisers than our streaming platform;

companies that offer advertisers the opportunity to reach consumers on other content and advertising mediums;

companies that operate in the same locations as our offices that may be better able attract and retain top talent in engineering, research and development, sales and marketing, operations and other organizations.

As the TV streaming market continues to develop, we may become subject to additional competition as we introduce or develop new products and services, as our existing products and services evolve, or as other companies introduce competing products and services.

As of December 31, 2019, we had approximately 1,650 full-time employees, of which approximately 850 were in research and development, approximately 550 were in sales and marketing, and approximately 250 were in general and administrative and operations.

None of our employees are represented by a labor union with respect to his or her employment.

We have not experienced any work stoppages and we consider our relations with our employees to be good.

Information about Segment and Geographic Areas

The segment and geographic information required herein is contained in Note 17 to the Consolidated Financial Statements in Item 8, which is incorporated herein by reference.

Corporate Information

We originally formed in October 2002 as Roku LLC under the laws of the State of Delaware.

On February 1, 2008, Roku LLC was converted into Roku, Inc., a Delaware corporation.

Roku, the Roku logo and other trade names, trademarks or service marks of Roku appearing in this report are the property of Roku.

Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders.

Human Capital Management

As the leading TV streaming platform in the U.S.

by hours streamed, we believe our success depends on our culture and our ability to attract and retain our employees.

As of December 31, 2020, we employed approximately 1,925 full-time employees located in nine countries.

Only our employees in Brazil are represented by a labor union with respect to their employment.

The majority of our employees currently are working remotely as a result of the COVID-19 pandemic.

We want our employees to be proud to work at Roku.

Our entrepreneurial, execution focused culture focuses on recruiting talented individuals, encouraging teamwork and expecting our employees to perform at a high level.

Across Roku, teams are expected to communicate clearly, in real time.

Because our employees are trusted and encouraged to make decisions, leadership communicates plans, milestones and strategic context broadly, and employees are trusted to maintain the confidentiality of such information.

Our employees are encouraged to use our broad talent base for diverse points of view when making decisions.

Diversity and Inclusion

Roku is committed to being a diverse and inclusive organization.

We follow through on this commitment through our annual pay equity analysis designed to ensure we pay fairly and equitably across gender and ethnicity, year over year;

our hiring and management trainings that incorporate topics on mitigating unconscious bias;

and by having diverse interviews panel that limit questions to those that are legally compliant and objectively tied to applicable job openings.

During 2020, we furthered our commitment to diversity and inclusion by promoting a new Vice President of Inclusion Strategy and Talent Development who is building a growing team that is focusing on priorities in four key areas:

Inclusive Employee Experiences, Inclusive Recruiting, Inclusive Communities & Social Impact, and Inclusive Customer Advocacy.

Inclusive Employee Experiences:

Among other initiatives, we have launched an Employee Resource Group (ERG) Program and are currently developing seven ERGs.

We also launched a series of educational employee-led dialogues that cover various topics of diversity ranging from ethnic diversity to neurodiversity and are providing diversity and inclusion training and curriculum in the areas of bias, leading diverse teams, and sourcing diverse talent.

Inclusive Recruiting:

Every member of our recruiting team is trained on how to source, engage, and recruit qualified diverse candidates.

In fact, all recruiters are equipped to discuss a diverse hiring strategy with every hiring manager to ensure we continue to widen the candidate pipeline for all roles.

Our University Recruiting and Intern programs weave diversity and inclusion into their strategies so that we are recruiting not only from diverse schools but also diverse clubs and programs across all schools.

Our external relationships also are focused on organizations that represent diverse communities, including technical and non-technical women and ethnic minority organizations, as well as professional Veteran’s networks, to enable our hiring managers and recruiters to attend or speak at diverse conferences, share our job descriptions, and tell our employer brand story to a wider audience.

Inclusive Communities & Social Impact:

We are in the process of developing new social impact programs to support employees and Roku in volunteerism, charitable activities, and youth engagement and anticipate we will have more to share related to our commitment to leaving a positive impact on young people and our wider community in future periods.

Inclusive Customer Advocacy:

As a TV streaming platform for viewers in the U.S.

and certain international locations, we want to reflect our users in our overall user experience and accessibility, content we license, and the channel on our platform.

During 2020, we launched a policy designed to acknowledge key areas of diversity and identity thoughtfully, meaningfully, and inclusive of our diverse customer base, year-round.

Training & Employee Development

Our Learning and Development function provides our employees with the training and development needed to support our growth.

Our employee training programs begin with a comprehensive New Hire Orientation that covers our

culture and business.

Our Orientation is supplemented by checklists and resources for an employee’s first 90 days.

In addition to mandatory training covering Anti-Harassment, Anti-Discrimination, and Privacy trainings, we offer employees a highly encouraged suite of training offerings such as Effective Feedback, Effective Meetings, and Communication and Presentation Skills.

Managers also are provided an additional set of trainings on Expectations for Managers, Interviewing and Hiring, and Performance Management to support new and newly promoted leaders in how to manage and lead effectively.

Our employees also have free access to additional training in technical and non-technical subjects through LinkedIn Learning.

We intend to continue to review, refresh, purchase and/or custom build additional training materials to support the performance and development needs of our global employees.

Compensation and Benefits

Our total compensation program is designed to attract, retain, and reward talented professionals.

As a result, we endeavor to pay competitive total compensation that is guided by market rates and tailored to account for the specific needs and responsibilities of a particular position as well as the unique qualifications of the individual employee.

In determining each employee’s total compensation, we consider what they would be paid by another employer, what we would have to pay to replace them it they leave Roku, and the amount we would pay to retain them.

We pay employees total compensation that is comprised of salary and equity awards rather than offer specific benefits or perks that might be valued differently by different employees.

We do not pay cash bonuses or have performance-based equity awards because our employees are expected to work at the highest level regardless of possible bonus payouts or awards.

Available Information

Our website address is www.roku.com.

We make available, free of charge through our website, our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and amendments to those reports, filed or furnished pursuant to Sections 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended, as soon as reasonably practicable after they have been electronically filed with, or furnished to, the Securities Exchange Commission (“SEC”).

Investors and others should note that we announce material financial information to our investors using our investor relations website (ir.roku.com), SEC filings, webcasts, press releases, and conference calls.

We use these mediums to communicate with investors and the general public about our company, our products and services and other issues.

It is possible that the information we make available may be deemed to be material information.

We therefore encourage investors, the media, and others interested in our company to review the information we post on our investor relations website.

The SEC maintains an internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Our website address is www.roku.com.

Information contained on or accessible through these websites is not incorporated by reference nor otherwise included in this report, and any references to these websites are intended to be inactive textual references only.

Information contained on or accessible through the websites listed above is not incorporated by reference nor otherwise included in this report, and any references to these websites are intended to be inactive textual references only.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business