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Item 1A. Risk Factors

2021-02-26 compared with 2020-03-02 · 775 added, 589 removed, 392 unchanged (78% of the section changed)

Our business involves significant risks, some of which are described below.

You should carefully consider the risks and uncertainties described below, together with all the other information in this Annual Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes.

You should carefully consider the risks and uncertainties described below, together with all the other information in this Report on Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the related notes.

If any of the following risks actually occurs, our business, reputation, financial condition, results of operations, revenue, and future prospects could be seriously harmed.

In addition, you should consider the interrelationship and compounding effects of two or more risks occurring simultaneously.

Unless otherwise indicated, references to our business being harmed in these risk factors will include harm to our business, reputation, financial condition, results of operations, revenue, and future prospects.

In that event, the market price of our Class A common stock could decline, and you could lose part or all of your investment.

Risk Factors Summary

Below is a summary of the principal factors that make an investment in our Class A common stock speculative or risky:

Risks Related to Our Business and Industry

We have incurred operating losses in the past, expect to incur operating losses in the future and may never achieve or maintain profitability.

We began operations in 2002 and we have experienced net losses in each year since inception.

As of December 31, 2019, we had an accumulated deficit of $313.8 million and for the year ended December 31, 2019, we had a net loss of $59.9 million.

We expect our operating expenses to increase in the future as we expand our operations.

If our revenue and gross profit do not grow at a greater rate than our operating expenses, we will not be able to achieve and maintain profitability.

We expect to incur significant losses in the future for a number of reasons, including without limitation the other risks and uncertainties described herein.

Additionally, we may encounter unforeseen operating or legal expenses, difficulties, complications, delays and other factors that may result in losses in future periods.

If our expenses exceed our revenue, we may never achieve or maintain profitability and our business may be harmed.

Our quarterly operating results may be volatile and are difficult to predict, and our stock price may decline if we fail to meet the expectations of securities analysts or investors.

Our revenue, gross profit and other operating results could vary significantly from quarter-to-quarter and year-to-year and may fail to match our past performance due to a variety of factors, including many factors that are outside of our control.

Factors that may contribute to the variability of our operating results and cause the market price of our Class A common stock to fluctuate include:

the entrance of new competitors or competitive products in our market, whether by established or new companies;

our ability to retain and grow our active account base and increase engagement among new and existing users;

our ability to maintain effective pricing practices, in response to the competitive markets in which we operate or other macroeconomic factors, such as inflation or increased taxes;

our revenue mix, which drives gross profit;

seasonal, cyclical or other shifts in revenue from advertising or player sales;

the timing of the launch of new or updated products, channels or features;

the addition or loss of popular content or channels;

the ability of retailers to anticipate consumer demand;

an increase in the manufacturing or component costs of our players or the manufacturing or component costs of our TV brand licensees for Roku TV models;

delays in delivery of our players, or Roku TV models, or disruptions in our, or our licensees’ supply or distribution chains;

an increase in costs associated with protecting our intellectual property, defending against third-party intellectual property infringement allegations or procuring rights to third-party intellectual property.

Our gross margins vary across our devices and platform offerings.

Player revenue has a lower gross margin compared to platform segment revenue derived through our arrangements with advertising, content distribution, billing and licensing activities.

Gross margins on our players vary across player models and can change over time as a result of product transitions, pricing and configuration changes, component costs, player returns and other cost fluctuations.

In addition, our gross margin and operating margin percentages, as well as overall profitability, may be

adversely impacted as a result of a shift in device, geographic or sales channel mix, component cost increases, price competition, or the introduction of new streaming devices, including those that have higher cost structures with flat or reduced pricing.

We have in the past and may in the future strategically reduce our player gross margin in an effort to increase the number of active accounts and grow our gross profit.

As a result, our player revenue may not increase as rapidly as it has historically, or at all, and, unless we are able to adequately increase our platform revenue and grow the number of active accounts, we may be unable to grow gross profit and our business will be harmed.

If a reduction in gross margin does not result in an increase in our active accounts, increase our platform revenue and gross profit, our financial results may suffer, and our business may be harmed.

If we have difficulty managing our growth in operating expenses, our business could be harmed.

We have experienced significant growth in our research and development, sales and marketing, support services, operations and general and administrative functions in recent years and expect to continue to expand these activities.

Our historical growth has placed, and expected future growth will continue to place, significant demands on our management, as well as our financial and operational resources, to:

manage a larger organization;

hire more employees, including engineers with relevant skills and experience;

expand our manufacturing and distribution capacity;

increase our sales and marketing efforts;

broaden our customer support capabilities;

support a larger number of TV brand and service operators;

implement appropriate operational and financial systems;

expand internationally;

maintain effective financial disclosure controls and procedures.

In addition, due to the continued growth in our headcount, we entered into lease agreements for a new corporate headquarters, which we began to occupy and started to incur material expenses for during 2019.

If we fail to manage our growth effectively, we may not be able to execute our business strategies and our business will be harmed.

the highly competitive nature of the TV streaming industry that is rapidly evolving;

our ability to monetize our streaming platform;

our ability to attract advertisers and advertising agencies to our demand-side advertising platform;

our ability to develop relationships with TV brands and service operators;

our ability to establish and maintain relationships with important content publishers;

popular or new content publishers not publishing their content on our streaming platform;

maintaining an adequate supply of quality video ad inventory on our platform and selling the available supply;

content publishers electing not to participate in platform features that we develop;

irrelevant or unengaging advertising, marketing campaigns or other promotional advertising on our platform;

our ability to attract users to and generate revenue from The Roku Channel;

users signing up for offerings and services outside of our platform;

the evolution of our industry and the impact of many factors that our outside of our control;

changes in consumer viewing habits;

our and our Roku TV brand partners’ reliance on retail sales channels to sell products;

our ability to build a strong brand and maintain customer satisfaction and loyalty;

advertiser and/or advertising agency delayed payment or failure to pay;

maintaining adequate customer support levels;

our ability to manage streaming device and other product introductions and transitions;

our and our Roku TV brand partners’ reliance on contract manufacturers and limited manufacturing capabilities;

our ability to forecast manufacturing requirements and manage inventory;

our ability to obtain key components from sole source suppliers;

interoperability of our streaming devices with content publishers’ offerings, technologies and systems;

detecting hardware errors or software bugs in our products before they are released to users;

component manufacturing, design or other defects that render our devices permanently inoperable;

our ability to obtain necessary or desirable third-party technology licenses;

Risks Related to Operating and Growing Our Business

our history of operating losses;

volatility of our quarterly operating results that could cause our stock price to decline;

our ability to manage our growth;

our ability to successfully expand our international operations;

seasonality of our business and its impact our revenue and gross profit;

attracting and retaining key personnel and managing succession;

maintaining systems that can support our growth, business arrangements and financial rules;

our ability to successfully complete acquisitions and investments and integrate acquired businesses;

our ability to comply with the terms of our outstanding credit facility;

our ability to secure funds to meet our financial obligations and support our planned business growth;

Risks Related to Cybersecurity, Reliability and Data Privacy

significant disruptions of information technology systems or data security breaches;

legal obligations and potential liability related to our users’ personal information;

our actual or perceived failure to adequately protect the personal and confidential information;

disruptions in computer systems or other services that results in a degradation of our platform;

changes in how network operators manage data that travel across their networks;

Risks Related to Intellectual Property

litigation resulting in the loss of important intellectual property rights;

failure to protect or enforce our intellectual property or proprietary rights;

our use of open source software;

our agreement to indemnify certain of our partners if our technology is alleged to infringe on third-parties’ intellectual property rights;

Risks Related to Macroeconomic Conditions

the current and future impact of the COVID-19 pandemic on our business;

natural disasters or other catastrophic events;

Legal and Regulatory Risks

enactment of or changes to government regulation or laws related to our business;

changes in general economic conditions, geopolitical conditions, and/or U.S.

trade policies that impact our business;

or international rules that permit ISPs to limit internet data consumption by users;

changes to current or future laws, regulations or government actions that impact our partners;

liability for content that is distributed through or advertising that is served through our platform;

our ability to maintain effective internal controls over financial reporting;

the impact of changes in accounting principles;

compliance with laws and regulations related to the collection of sales tax and payment of income tax;

changes to U.S.

or foreign taxation laws or regulations;

regulatory inquiries, investigations and proceedings;

Risks Related to Ownership of our Class A Common Stock

The dual class structure of our Class A common stock;

The volatility in the trading price of our Class A common stock;

Potential dilution or a decline in our stock price caused by future sales or issuance of our capital stock or rights to purchase capital stock;

A decline in our stock prices caused by future sales by existing stockholders;

Dependency on favorable securities and industry analyst reports;

The significant legal, accounting and other expenses associated with being a publicly-traded company;

The absence of dividends on our Class A or Class B common stock;

anti-takeover provisions in our charter;

the limitations resulting from our selection of the Delaware Court of Chancery and the federal district courts of the United States as the exclusive forums for substantially all disputes between us and our stockholders.

Risks Related to Our Business and Industry

TV streaming is highly competitive and many companies, including large technology companies, content owners and aggregators, TV brands and service operators, are actively focusing on this industry.

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Effective monetization requires us to continue to update the features and functionality of our streaming platform for users, content publishers and advertisers.

We also must effectively support popular sources of streaming content, such as Amazon Prime Video, Apple TV+, Disney+, Hulu, Netflix and YouTube and respond rapidly to actual and anticipated market trends in the TV streaming industry.

Companies such as Amazon, Apple and Google offer TV streaming devices that compete with our streaming players and Roku TV.

In addition, Google licenses its operating system software for integration into smart TVs and service provider set-top boxes and Amazon licenses its operating system software for integration into smart TVs.

We also must effectively support popular sources of streaming content that are available on our platform, such as Amazon Prime Video, Disney+, Discovery+, HBO Max, Hulu, Peacock, Netflix and YouTube.

And we must respond rapidly to actual and anticipated market trends in the TV streaming industry.

Companies such as Amazon, Apple and Google offer TV streaming devices that compete with our streaming players.

In addition, Google licenses its Android operating system software for integration into smart TVs and service provider set-top boxes, and Amazon licenses its operating system software for integration into smart TVs.

These companies have greater financial resources than we do and can subsidize the cost of their streaming devices in order to promote their other products and services, which could make it harder for us to acquire new users, retain existing users and increase streaming hours.

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Similarly, some service operators offer TV streaming applications as part of their cable service plans and can leverage their existing consumer bases, installation networks, broadband delivery networks and name recognition to gain traction in the TV streaming market.

If consumers of TV streaming content prefer these alternative products to our streaming players and our partners' Roku TV models, we may not be able to achieve our expected growth in revenue, gross profit or ARPU.

In July 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV models, and in September 2019, we launched our Roku Smart Soundbar and Roku Wireless Subwoofer.

As a result of these developments, we may face additional competition from makers of TV audio speakers and soundbars, as well as makers of other TV peripheral devices.

While our audio products have not generated significant revenue, if these products do not operate as designed or do not enhance the Roku TV or other viewing experience as we intend, our users’ overall viewing experience may be diminished, and this may impact the overall demand for Roku TV models or our other products.

If consumers of TV streaming content prefer alternative products to our streaming players and our partners' Roku TV models, we may not be able to achieve our expected growth in active accounts, streaming hours, revenue, gross profit or ARPU.

We expect competition in TV streaming from the large technology companies and service operators described above, as well as new and growing companies, to increase in the future.

This increased competition could result in pricing pressure, lower revenue and gross profit or the failure of our players, Roku TV models and our platform to gain or maintain broad market acceptance.

To remain competitive and maintain our position as a leading TV streaming platform we need to continuously invest in product development, marketing, service and support and device distribution infrastructure.

In addition, evolving TV standards such as 4K, 8K, HDR and unknown future developments may require further investments in the development of our players, Roku TV and our platform.

This increased competition could result in pricing pressure, lower revenue and gross profit or the failure of our players, Roku TV models or our platform to gain or maintain broad market acceptance.

To remain competitive and maintain our position as a leading TV streaming platform we need to continuously invest in our platform, product development, marketing, service and support and device distribution infrastructure.

In addition, evolving TV standards such as 8K, HDR and unknown future developments may require further investments in the development of our players, Roku TV models, and our platform.

We may not have sufficient resources to continue to make the investments needed to maintain our competitive position.

In addition, most of our competitors have longer operating histories, greater name recognition, larger customer bases and significantly greater financial, technical, sales, marketing and other resources than us, which provide them with advantages in developing, marketing or servicing new products and offerings.

As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion and sales of their products or the distribution of their content, and influence market acceptance of their products better than we can.

As a result, they may be able to respond more quickly to market demand, devote greater resources to the development, promotion, sales and distribution of their products or their content, and influence market acceptance of their products better than we can.

These competitors may also be able to adapt more quickly to new or emerging technologies or standards and may be able to deliver products and services at a lower cost.

Increased competition could reduce our sales volume, revenue and operating margins, increase our operating costs, harm our competitive position and otherwise harm our business.

In July 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV models, in September 2019, we launched our Roku Smart Soundbar and Roku Wireless Subwoofer and in September 2020, we launched our Roku Streambar.

As a result of these developments, we may face additional competition from makers of TV audio speakers and soundbars, as well as makers of other TV peripheral devices.

While our audio products have not generated material amounts of revenue, if these products do not operate as designed or do not enhance the Roku TV or other viewing experience as we intend, our users’ overall viewing experience may be diminished, and this may impact the overall demand for Roku TV models or our other products.

We also compete for video viewing hours with mobile platforms (phones and tablets), and users may prefer to view streaming content on such devices.

Increased use of mobile or other platforms for TV streaming could adversely impact the growth of our streaming hours, harm our competitive position and otherwise harm our business.

We operate in an evolving industry, which makes it difficult to evaluate our business and prospects.

If TV streaming develops more slowly than we expect, our operating results and growth prospects could be harmed.

In addition, our future growth depends on the growth of digital advertising.

TV streaming is a rapidly evolving industry, making our business and prospects difficult to evaluate.

The growth and profitability of this industry and the level of demand and market acceptance for our products and streaming platform are subject to a high degree of uncertainty.

We believe that the continued growth of streaming as an entertainment alternative will depend on the availability and growth of cost-effective broadband internet access, the quality of broadband content delivery, the quality and reliability of new devices and technology, the cost for users relative to other sources of content, as well as the quality and breadth of content that is delivered across streaming platforms.

These technologies, products and content offerings continue to emerge and evolve.

In addition, many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as linear TV, radio and print.

The future growth of our business depends on the growth of digital advertising, and on advertisers increasing their spend on such advertising.

We cannot be certain that they will do so.

If advertisers do not perceive meaningful benefits of digital advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.

Our future growth depends on the acceptance and growth of OTT advertising and OTT advertising platforms.

We operate in a highly competitive advertising industry and we compete for revenue from advertising with other streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV, and satellite and internet radio.

These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform.

These competitors are often very large and have more advertising experience and financial resources than we do, which may adversely affect our ability to compete for advertisers and may result in lower revenue and gross profit from advertising.

If we are unable to increase our revenue from advertising by, among other things, continuing to improve our platform’s capabilities to further optimize and measure advertisers’ campaigns, increase our advertising inventory and expand our advertising sales team and programmatic capabilities, our business and our growth prospects may be harmed.

We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.

Many advertisers continue to devote a substantial portion of their advertising budgets to traditional advertising, such as linear TV, radio and print.

The future growth of our business depends on the growth of OTT advertising, and on advertisers increasing their spend on advertising on our platform.

Although traditional TV advertisers showed growing interest in OTT advertising during 2020, we cannot be certain that their interest will continue to increase or that they will not revert to traditional TV advertising, especially if our users no longer stream TV or significantly reduce the amount of TV they stream either as a result of lifting of stay-at-home orders, the end of the COVID-19 pandemic or for other reasons.

If advertisers, or their agency relationships, do not perceive meaningful benefits of OTT advertising, the market may develop more slowly than we expect, which could adversely impact our operating results and our ability to grow our business.

We may not be successful in our efforts to further monetize our streaming platform, which may harm our business.

Our business model depends on our ability to generate platform revenue from advertisers and content publishers.

We generate platform segment revenue primarily from digital advertising and audience development campaigns that run across our streaming platform and from content distribution services.

As such, we are seeking to expand our user base and increase the number of hours that are streamed across our platform in an effort to create additional platform revenue opportunities.

As our user base grows and as we increase the amount of content offered and streamed across our streaming platform, we must effectively monetize our expanding user base and streaming activity.

The total number of streaming hours, however, does not correlate with platform segment revenue on a period-by-period basis, primarily because we do not monetize every hour streamed on our streaming platform.

Moreover, streaming hours on our platform are measured whenever a Roku player or a Roku TV is streaming content, whether a viewer is actively watching or not.

For example, if a Roku player is connected to a TV, and the viewer turns off the TV, steps away or falls asleep and does not stop or pause the player then the particular streaming channel may continue to play content for a period of time determined by the streaming channel.

We generate platform revenue primarily from advertising and audience development campaigns that run across our streaming platform and from content distribution services.

As such, we are seeking to expand the number of active accounts and increase the number of hours that are streamed across our platform in an effort to create additional platform revenue opportunities.

As our user base grows and as we increase the amount of content offered and streamed across our platform, we must effectively monetize our expanding user base and streaming activity.

The total number of streaming hours, however, does not correlate with platform revenue on a period-by-period basis, primarily because we do not monetize every hour streamed on our platform.

Moreover, streaming hours on our platform are measured whenever a player or a Roku TV is streaming content, whether a viewer is actively watching or not.

For example, if a player is connected to a TV, and the viewer turns off the TV, steps away or falls asleep and does not stop or pause the player then the particular streaming channel may continue to play content for a period of time determined by the streaming channel.

We believe that this also occurs across a wide variety of non-Roku streaming devices and other set-top boxes.

During the third quarter of 2019, we began rolling out a new Roku OS feature that is designed to identify when content has been continuously streaming on a channel for an extended period of time without user interaction.

This feature periodically prompts the user to confirm that they are still watching the selected channel and closes the channel if the user does not respond affirmatively.

We believe that implementing this new feature across the Roku platform will benefit us, our customers, channel partners and advertisers.

Some of our leading channel partners, including Netflix, have already implemented similar features within their channels.

This new Roku OS feature, which now has been rolled out to our entire installed base, supplements these channel features.

While we expect continued robust growth in our aggregate streaming hours as we grow active accounts and user engagement with our streaming platform increases, we believe our year-over-year growth rates of streaming hours reported in 2020 are likely to be lower than the year-over-year growth rates we reported in 2019.

We do not expect the rollout of this feature to have a material impact on our future financial performance.

Beginning in the third quarter of 2019 through the first quarter of 2020, we updated the Roku OS with a feature that is designed to identify when content has been continuously streaming on a channel for an extended period of time without user interaction.

This feature, which we refer to as “Are you still watching,” periodically prompts the user to confirm that they are still watching the selected channel and closes the channel if the user does not respond affirmatively.

We believe that the implementation of this feature across the Roku platform benefits us, our customers, channel partners and advertisers.

Some of our leading channel partners, including Netflix, also have similar features within their channels.

This Roku OS feature supplements these channel features.

This feature has not had and is not expected to have a material impact on our financial performance.

Our ability to deliver more relevant advertisements to our users and to increase our platform’s value to advertisers and content publishers depends on the collection of user engagement data, which may be restricted or prevented by a number of factors.

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For example, we are not able to fully utilize program level viewing data from many of our most popular channels to improve the relevancy of advertisements provided to our users.

Other channels available on our platform, such as Amazon Prime Video, Apple TV+, Hulu and YouTube, are focused on increasing user engagement and time spent within their channel by allowing users to purchase additional content and streaming services within their channels.

In addition, we do not currently monetize content provided on non-certified channels, which are not displayed in the Roku channel store and must be added manually by the user, on our streaming platform.

If our users spend most of their time within particular channels where we have limited or no ability to place advertisements or leverage user information, or users opt out from our ability to collect data for use in providing more relevant advertisements, we may not be able to achieve our expected growth in platform segment revenue or gross profit.

Other channels available on our platform, such

as Amazon Prime Video, Apple TV+, Hulu and YouTube, are focused on increasing user engagement and time spent within their channel by allowing users to purchase additional content and streaming services within their channels.

In addition, we do not currently monetize content provided on non-certified channels, which are not displayed in our channel store and must be added manually by the user, on our streaming platform.

If we are unable to further monetize our streaming platform, our business may be harmed.

In order to materially increase the monetization of our streaming platform through the sale of digital advertising, we will need our users to stream significantly more ad-supported content.

Our efforts to monetize our streaming platform through ad-supported content is still developing and may not continue to grow as we expect.

In order to materially increase the monetization of our streaming platform through the sale of video advertising, we will need our users to stream significantly more ad-supported content.

Our efforts to monetize our streaming platform through ad-supported content are still developing and may not continue to grow as we expect.

Further, while we have experienced, and expect to continue to experience, growth in our revenue from advertising, our efforts to monetize our streaming platform through the distribution of AVOD content are still developing and our advertising revenue may not grow as we expect.

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Accordingly, there can be no assurance that we will be successful in monetizing our streaming platform through the distribution of ad-supported content.

If we are unable to attract advertisers or advertising agencies to our OneView Ad Platform or if we are not successful in running a demand-side advertising platform, our business may be harmed.

In 2020, we announced the rebranding of the OneView Ad Platform, a demand-side platform through which advertisers and advertising agencies can programmatically purchase and manage their OTT, desktop and mobile advertising campaigns.

OneView leverages the DSP developed by dataxu, which we acquired in November 2019, and integrates the reach, inventory and capabilities of our proprietary advertising products and services.

The market for programmatic OTT ad buying is an emerging market, and our current and potential advertisers and advertising agencies may not shift to programmatic ad buying from other buying methods as quickly as we expect or at all.

If the market for programmatic OTT ad buying deteriorates or develops more slowly than we expect, advertisers and advertising agencies may not use OneView or we may not attract prospective advertisers or advertising agencies to OneView, and our business could be harmed.

In addition, we have limited experience running a DSP and if OneView does not have the functionality or services expected by advertisers or advertising agencies, we may not be able to attract their advertising spend to OneView or our existing customers may not maintain or increase their spend on OneView.

If we fail to adapt to our rapidly changing industry or to our customers evolving needs, advertisers and advertising agencies will not adopt OneView and our business may be harmed.

We also may not be able to compete effectively with more established DSPs or be able to adapt to changes or trends in programmatic OTT advertising, which would harm our ability to grow our advertising revenue and harm our business.

Our growth will depend in part on our ability to develop and expand our relationships with TV brand partners in the United States and international markets and, to a lesser extent, service operators.

We have developed, and intend to continue to develop and expand, relationships with TV brand partners and, to a lesser extent, service operators in both the United States and international markets.

Our licensing arrangements are complex and time-consuming to negotiate and complete.

Our current and potential partners include TV brands, cable and satellite companies and telecommunication providers.

We continue to invest in the growth and expansion of our Roku TV program both in the United States and International markets.

Our licensing program for service operators has historically been primarily focused on international markets and has not been growing in scale in recent years, as we have shifted the focus of our international growth to the sale of Roku streaming players and Roku TV models.

In the past few years, the sale of Roku TV models by our TV brand partners has materially contributed to our active account growth, to our streaming hours, and to our platform monetization efforts.

This growth has primarily been in the United States;

however, our Roku TV licensing program has been expanded to certain international markets.

We license the Roku OS and our smart TV reference designs to certain TV brand partners to manufacture co-branded smart TVs.

We have not received, nor do we expect to receive, license revenue from these arrangements, but we expect to incur expenses in connection with these commercial agreements.

The primary economic benefits that we derive from these license arrangements have been and will likely continue to be indirect, primarily from growing our active accounts, increasing streaming hours and generating advertising-related revenues on our platform.

If these arrangements do not continue to

result in increased active accounts and streaming hours, and if that growth does not in turn lead to successfully monetizing that increased user activity, our business may be harmed.

The loss of a relationship with a TV brand or service operator could harm our results of operations, damage our reputation, increase pricing and promotional pressures from other partners and distribution channels, or increase our marketing costs.

If we are not successful in maintaining existing and creating new relationships with any of these third parties, or if we encounter technological, content licensing or other impediments to our development of these relationships, our ability to grow our business could be adversely impacted.

Under these license arrangements, we generally have limited control over the amount and timing of resources these entities dedicate to the relationship.

If our TV brand or service operator partners fail to meet their forecasts for distributing licensed streaming devices, or chose to deploy competing streaming solutions within their product lines, our business may be harmed.

We depend on a small number of content publishers for a majority of our streaming hours, and if we fail to maintain these relationships, our business could be harmed.

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If, for any reason, we cease distributing channels that have historically streamed a large percentage of the aggregate streaming hours on our platform, our streaming hours, active accounts or streaming device sales may be adversely affected, and our business may be harmed.

Most of our agreements with content publishers are not long term and can be terminated by the content publishers under certain circumstances.

Any disruption in the renewal of such agreements may result in the removal of certain channels from our streaming platform and may harm our active account growth and engagement.

We enter into agreements with all our content publishers, which have varying terms and conditions, including expiration dates.

Our agreements with content publishers generally have terms of one to three years and can be terminated before the end of the term by the content publisher under certain circumstances, such as if we materially breach the agreement, become insolvent, enter bankruptcy, commit fraud or fail to adhere to the content publishers’ security or other platform certification requirements.

Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue providing content from these content publishers on our streaming platform.

We may not be able to reach a satisfactory agreement before our existing agreements have expired.

If we are unable to renew such agreements on a timely basis on mutually agreeable terms, we may be required to temporarily or permanently remove certain channels from our streaming platform.

The loss of such channels from our streaming platform for any period of time may harm our business.

More broadly, if we fail to maintain our relationships with the content publishers on terms favorable to us, or at all, or if these content publishers face problems in delivering their content across our platform, we may lose channel partners or users and our business may be harmed.

If popular content is not available on our platform, we may fail to retain existing users and attract new users.

We must continuously maintain existing relationships and identify and establish new relationships with content publishers to provide popular content.

If popular or new content publishers do not publish content on our platform, we may fail to retain existing users and attract new users.

We must continuously maintain existing relationships and identify and establish new relationships with content publishers to provide popular streaming channels and popular content.

In order to remain competitive, we must consistently meet user demand for popular streaming channels and content;

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Our ability to successfully help content publishers maintain and expand their channel offerings on a cost-effective basis largely depends on our ability to:

effectively market new streaming channels and enhancements to our existing streaming channels;

effectively promote and market new and existing streaming channels;

minimize launch delays of new and updated streaming channels;

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In addition, if service operators, including pay TV providers, refuse to grant our users access to stream certain channels or only make content available on devices they prefer, our ability to offer a broad selection of popular streaming channels or content may be limited.

If we fail to help our content publishers maintain and expand their channel offerings or their channels are not available, our business may be harmed.

Our growth will depend in part on our ability to develop relationships with TV brands and, to a lesser extent, service operators.

We developed, and intend to continue to develop, relationships with TV brands and, to a lesser extent, service operators in both the United States and international markets.

Our licensing arrangements are complex and time-consuming to negotiate and complete.

Our current and potential partners include TV brands, cable and satellite

companies and telecommunication providers.

Under these license arrangements, we generally have limited control over the amount and timing of resources these entities dedicate to the relationship.

If our TV brand or service operator partners fail to meet their forecasts for distributing licensed streaming devices, our business may be harmed.

We license the Roku OS and our smart TV hardware reference designs to certain TV brands to manufacture co-branded smart TVs.

The primary economic benefits that we derive from these license arrangements have been and will likely continue to be indirect, primarily from growing our active accounts and increasing streaming hours on our platform.

We have not received, nor do we expect to receive, significant license revenue from these arrangements in the near term, but we expect to incur expenses in connection with these commercial agreements.

If these arrangements do not result in increased active accounts or streaming hours, our business may be harmed.

We and our Roku TV brand partners depend on our retail sales channels to effectively market and sell our players and Roku TV models, and if we or our partners fail to maintain and expand effective retail sales channels, we could experience lower player or Roku TV sales.

To continue to increase our active accounts, we must maintain and expand our retail sales channels.

The majority of our players and our TV brand partners' 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.

To a lesser extent, we sell players directly through our website and internationally through distributors.

For the year ended December 31, 2019, Amazon, Best Buy and Walmart in total accounted for 72% of our player segment revenue and are expected to each account for more than 10% of our player segment revenue in fiscal 2020.

These three retailers collectively accounted for 68% and 61% of our player revenue for the years ended December 31, 2018 and 2017, respectively.

These retailers and our international distributors also sell products offered by our competitors.

We have no minimum purchase commitments or long-term contracts with any of these retailers or distributors.

If one or several retailers or distributors were to discontinue selling our players or TV brands' Roku TV models or choose not to prominently display those devices in their stores or on their websites, the volume of our streaming devices sold could decrease, which would harm our business.

For example, in April 2018, Amazon and Best Buy announced a partnership whereby two Best Buy controlled smart TV brands will exclusively utilize Amazon’s operating system, and such TVs will be sold by Best Buy and Amazon.

Although, to date, this arrangement has not limited our TV brand partners’ ability to sell on either Amazon or at Best Buy, if our existing TV brands choose to work exclusively with other operating system developers, this may impact our ability to license the Roku OS and our smart TV hardware reference design to TV brands and our ability to continue to grow active accounts.

Traditional retailers have limited shelf and end cap space in their stores and limited promotional budgets, and online retailers have limited prime website product placement space.

Competition is intense for these resources, and a competitor with more extensive product lines and stronger brand identity, such as Amazon or Google, possesses greater bargaining power with retailers.

In addition, one of our online retailers, Amazon, sells its own competitive streaming devices and is able to market and promote these products more prominently on its website, and could refuse to offer our devices.

Any reduction in our ability to place and promote our devices, or increased competition for available shelf or website placement, would require us to increase our marketing expenditures simply to maintain our product visibility, which may harm our business.

In particular, the availability of product placement during peak retail periods, such as the holiday season, is critical to our revenue growth, and if we are unable to effectively sell our devices during these periods, our business would be harmed.

We may be unable to successfully expand our international operations and our international expansion plans, if implemented, will subject us to a variety of risks that may harm our business.

We currently generate the vast majority of our revenue in the United States and have limited experience marketing, selling, licensing and supporting our devices and monetizing our streaming platform outside the United States.

In addition, we have limited experience managing the administrative aspects of a global organization.

While we intend to continue to explore opportunities to expand our business in international markets in which we see

compelling opportunities, we may not be able to create or maintain international market demand for our devices and streaming platform.

In the course of expanding our international operations and operating overseas, in addition to the risks we face in the United States, we will be subject to a variety of risks that could adversely affect our business, including:

compliance with laws such as the Foreign Corrupt Practices Act, UK Bribery Act and other anti-corruption laws, export controls and economic sanctions, and local laws prohibiting corrupt payments to government officials;

slower adoption and acceptance of streaming devices and services in other countries;

competition with other devices that consumers may use to stream TV or existing local traditional pay TV services and products, including those provided by incumbent pay TV service providers;

greater difficulty supporting and localizing our streaming devices and streaming platform, including delivering support and training documentation in languages other than English;

our ability to deliver or provide access to popular streaming channels to users in certain international markets;

different or unique competitive pressures as a result of, among other things, the presence of local consumer electronics companies and the greater availability of free content on over-the-air channels in certain countries;

availability of reliable broadband connectivity and wide area networks in areas targeted for expansion;

challenges inherent in efficiently staffing and managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, compensation and benefits, and compliance programs;

difficulties in understanding and complying with local laws, regulations and customs in foreign jurisdictions;

differing legal and court systems, including limited or unfavorable intellectual property protection;

unstable political and economic conditions whatever the cause, including pandemics, Brexit, tariffs, trade wars, or long-term environmental risks;

international political or social unrest or economic instability, including as a result of the United Kingdom’s withdrawal from the EU, and other political tensions between countries in which we do business;

adverse tax consequences such as those related to changes in tax laws or tax rates or their interpretations could impact our judgment in determining our tax provision and effective tax rate;

the imposition of customs duties on cross-border data flows for streaming services, which are currently prohibited under the WTO’s e-commerce moratorium, but could be permitted if certain WTO Members continue to oppose extension of the moratorium when it is considered at the WTO’s MC-12 Ministerial Meeting in June 2020;

digital services taxes, which have been imposed or are under consideration by several European and other countries, which would lead to taxes on certain digital services even though the providers would not be subject to tax under existing international tax rules and treaties;

COVID-19 or any other pandemics or epidemics could result in decreased economic activity in certain markets, decreased use of our products, or in our decreased ability to import, export or sell our products to supply such services to existing or new customers in international markets;

fluctuations in currency exchange rates could impact our revenue and expenses of our international operations and expose us to foreign currency exchange rate risk;

restrictions on the repatriation of earnings from certain jurisdictions;

future possible changes in U.S.

regulations on exports of U.S.

technologies or dealings with certain countries or parties;

working capital constraints.

If we invest substantial time and resources to expand our international operations and are unable to do so successfully and in a timely manner, our business and financial condition may be harmed.

If we fail to help our content publishers maintain and expand their audiences on the Roku platform or their channels are not available on our platform, our business may be harmed.

Most of our agreements with content publishers are not long term and can be terminated by the content publishers under certain circumstances.

Any disruption in the renewal of such agreements may result in the removal of certain channels from our streaming platform and may harm our active account growth and engagement.

We enter into agreements with all our content publishers, which have varying terms and conditions, including expiration dates.

Upon expiration of these agreements, we are required to re-negotiate and renew them in order to continue providing content from these content publishers on our streaming platform.

We have in the past been unable, and in the future may not be able, to reach a satisfactory agreement with certain content publishers before our existing agreements have expired.

If we are unable to renew such agreements on a timely basis on mutually agreeable terms, we may be required to temporarily or permanently remove certain channels from our streaming platform.

The loss of such channels from our streaming platform for any period of time may harm our business.

More broadly, if we fail to

maintain our relationships with the content publishers on terms favorable to us, or at all, or if these content publishers face problems in delivering their content across our platform, we may lose channel partners or users and our business may be harmed.

If we are unable to maintain an adequate supply of quality video ad inventory on our platform or effectively sell our available video ad inventory, our business may be harmed.

While The Roku Channel serves as a valuable source of video ad inventory for us to sell, we are also dependent on our ability to monetize video ad inventory that we obtain from the publishers of ad-supported channels on our streaming platform.

We may fail to attract content publishers that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform and continue to grow supply of quality video ad inventory.

Our business model depends on our ability to grow video ad inventory on our streaming platform and sell it to advertisers.

Our access to video ad inventory in ad-supported streaming channels on our platform varies greatly among channels, accordingly, we do not have access to all of the video ad inventory on our platform.

While The Roku Channel serves as a valuable source of video ad inventory for us to sell, we are also dependent on our ability to monetize video ad inventory within other ad-supported channels on our streaming platform.

We seek to obtain the ability to sell such inventory from the content publishers of such channels.

We may fail to attract content publishers that generate a sufficient quantity or quality of ad-supported content hours on our streaming platform, or fail to obtain access to a sufficient quantity and quality of ad inventory from the publishers of such content.

Our access to video ad inventory in ad-supported streaming channels on our platform varies greatly among channels;

accordingly, we do not have access to all of the video ad inventory on our platform.

For certain channels, including YouTube’s ad supported channel, we have no access to video ad inventory at this time, and we may not secure access in the future.

The amount, quality and cost of video ad inventory available to us can change at any time.

If we are unable to grow and maintain a sufficient supply of quality digital advertising inventory at reasonable costs to keep up with demand, our business may be harmed.

We operate in a highly competitive industry and we compete for revenue from advertising with other internet streaming platforms and services, as well as traditional media, such as radio, broadcast, cable and satellite TV, and satellite and internet radio.

These competitors offer content and other advertising mediums that may be more attractive to advertisers than our streaming platform.

We may not be able to compete effectively or adapt to any such changes or trends, which would harm our ability to grow our advertising revenue and harm our business.

Significant disruptions of our information technology systems or data security incidents could harm our reputation, cause us to modify our business practices and otherwise adversely affect our business and subject us to liability.

We are increasingly dependent on information technology systems and infrastructure to operate our business.

In the ordinary course of our business, we collect, store, process and transmit large amounts of sensitive corporate, personal and other information, including intellectual property, proprietary business information, user payment card information, other user information and other confidential information.

It is critical that we do so in a secure manner to maintain the confidentiality, integrity and availability of such information.

Our obligations under applicable laws, contracts, industry standards, self-certifications, and other documentation may include maintaining the confidentiality, integrity and availability of personal information in our possession or control.

These obligations create potential legal liability, to regulators, our business partners, our users, and other relevant stakeholders and also impact the attractiveness of our subscription service to existing and potential users.

We have outsourced certain elements of our operations (including elements of our information technology infrastructure) to third parties, or may have incorporated technology into our platform, that collects, processes, transmits and stores our users’ or others’ personal information (such as payment card information) and as a result, we manage a number of third-party vendors who may or could have access to our information technology systems (including our computer networks) or to our confidential information.

In addition, many of those third parties in turn subcontract or outsource some of their responsibilities to third parties.

As a result, our information technology systems, including the functions of third parties that are involved or have access to those systems, is very large and complex.

While all information technology operations are inherently vulnerable to inadvertent or intentional security breaches, incidents, attacks and exposures, the size, complexity, accessibility and distributed nature of our information technology systems, and the large amounts of sensitive or personal information stored on those systems, make such systems potentially vulnerable to unintentional or malicious, internal and external threats on our technology environment.

Vulnerabilities can be exploited from inadvertent or intentional actions of our employees, third-party vendors, business partners, or by malicious third parties.

Attacks of this nature are increasing in their

frequency, levels of persistence, sophistication and intensity, and are being conducted by sophisticated and organized groups and individuals with a wide range of motives (including, but not limited to, industrial espionage) and expertise, including organized criminal groups, “hacktivists,” nation states and others.

For example, despite our efforts to secure our information technology systems and the data contained in those systems, including any efforts to educate or train our employees, we remain vulnerable to phishing attacks.

In addition to the unauthorized access or acquisition of sensitive or personal information, such threats could include the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information.

Some of these external threats may be amplified by the nature of our third-party web hosting, cloud computing, or network-dependent streaming services or suppliers.

Our systems likely experience directed attacks on at least a periodic basis that are intended to interrupt our operations;

interrupt our users’, content publishers’ and advertisers’ ability to access our platform;

extract money from us;

and/or obtain our data (including without limitation user or employee personal information or proprietary information).

Although we have implemented certain systems, processes, and safeguards intended to protect our information technology systems and data from such threats and mitigate risks to our systems and data, we cannot be certain that threat actors will not have a material impact on our systems or services in the future.

Additionally, our third-party vendors or business partners’ information technology systems may be vulnerable to similar threats and our business could be affected by those or similar third-party relationships.

We maintain insurance policies to cover certain losses relating to our information technology systems.

However, there may be exceptions to our insurance coverage such that our insurance policies may not cover some or all aspects of a security incident.

Even where an incident is covered by our insurance, the insurance limits may not cover the costs of complete remediation and redress that we may be faced with in the wake of a security incident.

The successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), could have an adverse effect on our business.

In addition, we cannot be sure that our existing insurance coverage and coverage for errors and omissions will continue to be available on acceptable terms or that our insurers will not deny coverage as to any future claim.

Though it is difficult to determine what harm may directly result from any specific interruption or breach, any failure to maintain performance, reliability, security and availability of our network infrastructure to the satisfaction of our users, business partners, regulators or other relevant stakeholders may harm our reputation and our ability to retain existing users and attract new users.

Because of our prominence in the TV streaming industry, we believe we may be a particularly attractive target for threat actors.

Our platform also incorporates licensed software from third-parties, including open source software, and we may also be vulnerable to attacks that focus on such third-party software.

Any attempts by threat actors to disrupt our platform, our streaming devices, website, computer systems or our mobile apps, if successful, could harm our business, subject us to liability, be expensive to remedy, cause harm to our systems and operations and damage our reputation.

Efforts to prevent threat actors from entering our computer systems or exploiting vulnerabilities in our devices are expensive to implement and may not be effective in detecting or preventing intrusion or vulnerabilities.

Such unauthorized access to our data could damage our reputation and our business and could expose us to the risk of contractual damages, litigation and regulatory fines and penalties that could harm our business.

The risk of harm to our business caused by security incidents may also increase as we expand our product and service offerings and as we enter into new markets.

Implementing, maintaining, and updating security safeguards requires substantial resources now and will likely be an increasing and substantial cost in the future.

Significant disruptions of our third-party vendors’ and/or commercial partners’ information technology systems or other similar data security incidents could adversely affect our business operations and/or result in the loss, misappropriation, and/or unauthorized access, use or disclosure of, or the prevention of access to, sensitive or personal information, which could harm our business.

In addition, information technology system disruptions, whether from attacks on our technology environment or from computer viruses, natural disasters, terrorism, war and telecommunication and electrical failures, could result in a material disruption of our product development and our business operations.

There is no way of knowing with certainty whether we have experienced any data security incidents that have not been discovered.

While we have no reason to believe that we have experienced a data security incident that we have not discovered, attackers have become very sophisticated in the way they conceal their unauthorized access to systems, and many companies that have been attacked are not aware that they have been attacked.

Any event that leads to unauthorized access, use or disclosure of personal information, including but not limited to personal

information regarding our users, could disrupt our business, harm our reputation, compel us to comply with applicable federal and/or state breach notification laws and foreign law equivalents, subject us to time consuming, distracting and expensive litigation, regulatory investigation and oversight, mandatory corrective action, require us to verify the correctness of database contents, or otherwise subject us to liability under laws, regulations and contractual obligations, including those that protect the privacy and security of personal information.

This could result in increased costs to us and result in significant legal and financial exposure and/or reputational harm.

For example, in the wake of a data breach involving payment card data, we may be subject to substantial penalties and related enforcement for failure to adhere to the technical or operational security requirements of the Payment Card Industry (“PCI”) Data Security Standards (“DSS”) imposed by the PCI Council to protect cardholder data.

Penalties arising from PCI DSS enforcement are inherently uncertain as penalties may be imposed by various entities within the payment card processing chain without regard to any statutory or universally mandated framework.

Such enforcement could threaten our relationship with our banks, card brands we do business with, and our third-party payment processors.

In addition, any failure or perceived failure by us or our vendors or business partners to comply with our privacy, confidentiality or data security-related legal or other obligations to third parties, or any further security incidents or other unauthorized access events that result in the unauthorized access, release or transfer of sensitive information, which could include personal information, may result in governmental investigations, enforcement actions, regulatory fines, litigation, or public statements against us by advocacy groups or others, and could cause third parties, including current and potential partners, to lose trust in us including existing or potential users’ perceiving our platform, system or networks as less desirable or we could be subject to claims by third parties that we have breached our privacy- or confidentiality-related obligations, which could materially and adversely affect our business and prospects.

There can be no assurance that the limitations of liability in our contracts would be enforceable or adequate or would otherwise protect us from liabilities or damages.

Moreover, data security incidents and other inappropriate access can be difficult to detect, and any delay in identifying them may lead to increased harm of the type described above.

While we have implemented security measures intended to protect our information technology systems and infrastructure, as well as the personal and proprietary information that we possess or control, there can be no assurance that such measures will successfully prevent service interruptions or further security incidents.

Data protection laws around the world often take a principled, risk-based approach to information security and require “reasonable”, “appropriate” or “adequate” technical and organizational security measures, meaning that the interpretation and application of those laws are often uncertain and evolving, and there can be no assurance that our security measures will be deemed adequate or reasonable in all instances.

Moreover, even security measures that are deemed appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to protect the information we maintain.

In addition to potential fines, we could be subject to mandatory corrective action due to a data security incident, which could adversely affect our business operations and result in substantial costs for years to come.

Our actual or perceived failure to adequately protect personal data and confidential information that we (or our service providers or business partners) collect, store or process could trigger contractual and legal obligations, harm our reputation, subject us to liability and otherwise adversely affect our business including our financial results.

In the ordinary course of our business, we collect, store and process personal data (including payment card information) and/or other confidential information of our employees, our partners, and our users.

We use third-party service providers and subprocessors to help us deliver our services.

These vendors may store or process personal information, payment card information and/or other confidential information of our employees, our partners, or our users.

We collect such information from individuals located both in the United States and abroad and may store or process such information outside the country in which it was collected.

A variety of state, national, and foreign laws and regulations apply to the collection, use, retention, protection, disclosure, security, transfer and other processing of personal data.

These privacy and data protection-related laws and regulations are evolving, with new or modified laws and regulations proposed and implemented frequently and existing laws and regulations subject to new or different interpretations.

In addition, each state and the District of Columbia, Guam, Puerto Rico, the U.S.

Virgin Islands, European Union member states, and the United Kingdom, as well as some other foreign nations, have passed laws requiring notification to regulatory authorities, to affected users, and/or others within a specific timeframe when there has been a security breach

involving certain personal data as well as impose additional obligations for companies.

Additionally, our agreements with certain users or partners may require us to notify them in the event of a security breach.

Such statutory and contractual disclosures are costly, could lead to negative publicity, may cause our customers to lose confidence in the effectiveness of our security measures and require us to expend significant capital and other resources to respond to and/or alleviate problems caused by the actual or perceived security breach.

Compliance with these obligations could delay or impede the development of new products and may cause reputational harm.

Litigation resulting from security breaches may adversely affect our business.

Unauthorized access to our platform, systems, networks, or physical facilities could result in litigation with our users, or other relevant stakeholders.

These proceedings could force us to spend money in defense or settlement, divert management’s time and attention, increase our costs of doing business, or adversely affect our reputation.

We could be required to fundamentally change our business activities and practices or modify our products and/or platform capabilities in response to such litigation, which could have an adverse effect on our business.

Any actual or perceived inability to adequately protect the privacy of individuals’ information in our possession, custody or control may render our products or services less desirable and could harm our reputation and business.

Any costs incurred as a result of this potential liability could harm our business.

We and our third-party contractors collect, process, transmit and store the personal information of our users, which creates legal obligations and exposes us to potential liability.

We collect, process, transmit and store information about a variety of individuals including our users and their devices, and rely on service providers to collect, process, transmit and store personal information of our users, including our users’ payment card data.

Further, we and our service providers as well as business partners use tracking technologies, including cookies, device identifiers and related technologies, to help us manage and track our users’ interactions with our platform, devices, website and partners’ content to deliver relevant advertising and personalized content for ourselves and on behalf of our partners on our devices.

We collect information about the interaction of users with our platform, devices, website, advertisements, and content publishers’ streaming channels.

To deliver relevant advertisements effectively, we must successfully leverage this data as well as data provided by third parties.

Our ability to collect and use such data could be restricted by a number of factors, including users’ having the ability to refuse consent to or opt out from our, our service providers or our advertising partners’ collection and use of this data, restrictions imposed by advertisers, content publishers and service providers, changes in technology, and developments in laws, regulations and industry standards.

For example, certain European Union laws and regulations prohibit access to or storage of information on a user's device (such as cookies and similar technologies that we use for advertising) that is not “strictly necessary” to provide a user-requested service or used for the “sole purpose” of a transmission unless the user has provided unambiguous, affirmative consent, and users may choose not to provide this consent to collection of information which is used for advertising purposes.

Any restrictions on our ability to collect or use data could harm our ability to grow our revenue, particularly our platform revenue which depends on engaging the relevant recipients of advertising campaigns.

Various federal, state, and foreign laws and regulations as well as industry standards and contractual obligations govern the collection, use, retention, sharing and security of the data we receive from and about our users, employees and other individuals.

The regulatory environment for the collection and use of personal data by device manufacturers, online service providers, content distributors, advertisers and publishers is evolving in the United States and internationally.

Privacy groups and government bodies, including the Federal Trade Commission (“FTC”), state attorneys general, the European Commission and European data protection authorities, have increasingly scrutinized privacy issues with respect to devices that identify or are identifiable to a person and personal data collected through the internet, and we expect such scrutiny to continue to increase.

The United States and foreign governments have enacted and are considering laws and regulations that could significantly restrict industry participants’ ability to collect, use and share personal data, such as by regulating the level of consumer notice and consent required before a company can place cookies or other tracking technologies.

For example, the EU General Data Protection Regulation (“GDPR”) became effective in May 2018 and imposes detailed requirements related to the collection, storage and use of personal data related to people located in the EU or which is processed in the context of EU operations and places new data protection obligations and restrictions on organizations and may require us to make further changes to our policies and procedures in the future beyond what we have already done.

Further, in the wake of Brexit, there has been uncertainty with regard to the regulation of data protection in the United Kingdom.

Although the United Kingdom enacted a Data Protection Act in May 2018, a level of uncertainty remains regarding how data transfers to and from the United Kingdom will be regulated after Brexit.

We made changes to our data protection compliance program to prepare for the GDPR and will continue to monitor the implementation and evolution of data protection regulations, but if we are not compliant with GDPR or other data protection laws or regulations if and when implemented, we may be subject to significant fines and penalties (such as restrictions on personal data processing) and our business may be harmed.

For example, under the GDPR, fines of up to EUR 20 million or 4% of the annual global revenue of a noncompliant company, whichever is greater, as well as data processing restrictions could be imposed for violation of certain of the GDPR’s requirements.

Other countries have also proposed or passed legislation with personal data obligations similar to that of the GDPR.

data protection legal landscape also continues to evolve, with California and Nevada having enacted broad-based data privacy and protection legislation and with states and the federal government continuing to consider additional data privacy and protection legislation.

The potential effects of this legislation are far-reaching and may require us to modify our data processing practices and policies and to incur substantial costs and expenses in an effort to comply.

Effective October 1, 2019, Nevada amended its existing Security of Personal Information Law (“SPI Law”) to now require, among other things, that certain businesses provide a designated request address to intake requests from consumers to opt out of the sale of their personal data.

The California Consumer Privacy Act (“CCPA”) went into effect in January 2020 and gives California residents certain rights with respect to their personal information such as rights to access and require deletion of their personal information, opt out of the sale of their personal information, and receive detailed information about how their personal information is used.

The CCPA also provides for civil penalties for violations, as well as a private right of action for data breaches that may increase data breach litigation.

The CCPA was amended and the California Office of the Attorney General has proposed regulations to implement portions of the CCPA.

These regulations are subject to public comment.

Depending on the final text of the regulations, they may significantly impact the CCPA compliance measures we have, or will, undertake.

We are continuing to assess the impact of new and proposed data privacy and protection laws and proposed amendments to existing laws on our business.

Applicable data privacy and security laws may also obligate us to employ security measures that are appropriate to the nature of the data we collect and process and, among other factors, the risks attendant to our data processing activities in order to protect personal information from unauthorized access or disclosure, or accidental or unlawful destruction, loss, or alteration.

We have implemented security measures that we believe are appropriate, but a regulator could deem our security measures not to be appropriate given the lack of prescriptive measures in certain data protection laws.

Given the evolving nature of security threats and evolving safeguards, we cannot be sure that our chosen safeguards will protect against security threats to our business including the personal data that we process.

However, even security measures that are appropriate, reasonable, and/or in accordance with applicable legal requirements may not be able to fully protect our information technology systems and the data contained in those systems, or our data that is contained in third parties’ systems.

Moreover, certain data protection laws impose on us responsibility for our employees and third parties that assist with aspects of our data processing.

Our employees’ or third parties’ intentional, unintentional, or inadvertent actions may increase our vulnerability or expose us to security threats, such as phishing attacks, and we may remain responsible for successful access, acquisition or other disclosure of our data despite the quality and legal sufficiency of our security measures.

As part of our data protection compliance program, we have implemented data transfer mechanisms to provide for the transfer of personal data from the European Economic Area (the “EEA”) to the United States.

However, there are certain unsettled legal issues regarding the adequacy of these data transfer mechanisms, the resolution of which may adversely affect our ability to transfer personal data from the EEA to the United States.

We will continue to review our business practices and may find it necessary or desirable to make changes to our personal data processing to cause our transfer and receipt of EEA residents’ personal data to conform to applicable European law.

The regulation of data privacy in the EU continues to evolve, and it is not possible to predict the ultimate effect of evolving data protection regulation and implementation over time.

Member states also have some flexibility to supplement the GDPR with their own laws and regulations and may apply stricter requirements for certain data processing activities.

In addition, some countries are considering or have enacted 'data localization' laws requiring that user data regarding users in their country be maintained in their country.

Maintaining local data centers in individual countries could increase our operating costs significantly.

We expect that, in addition to the business as usual costs of compliance, the evolving regulatory interpretation and enforcement of laws such as the GDPR and CCPA and other domestic and foreign data protection laws will lead to increased operational and compliance costs and will require us to continually monitor and, where necessary, make changes to our operations, policies, and procedures.

Any failure or perceived failure to comply with privacy-related legal obligations, or any compromise of security of user data, may result in governmental enforcement actions, litigation, contractual indemnity or public statements against us by consumer advocacy groups or others.

In addition to potential liability, these events could harm our business.

We publish privacy policies, notices, self-certifications (such as the EU-US Privacy Shield), and other documentation regarding our collection, processing, use and disclosure of personal information, credit card information and/or other confidential information.

Although we endeavor to comply with our published policies, certifications, and documentation, we may at times fail to do so or may be perceived to have failed to do so.

Moreover, despite our efforts, we may not be successful in achieving compliance if our employees or vendors fail to comply with our published policies, certifications, and documentation.

Such failures can subject us to potential international, local, state and federal action if they are found to be deceptive, unfair, or misrepresentative of our actual practices.

We have incurred, and will continue to incur, expenses to comply with privacy and security standards and protocols imposed by law, regulation, industry standards and contractual obligations.

Increased regulation of data collection, use and security practices, including self-regulation and industry standards, changes in existing laws, enactment of new laws, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm our business.

If government regulations or laws relating to the internet, video, advertising, or other areas of our business change, we may need to alter the manner in which we conduct our business, or our business could be harmed.

We are subject to general business regulations and laws, as well as regulations and laws specific to the internet and online services, which may include laws and regulations related to data privacy and security, consumer protection, data localization, law enforcement access to data, encryption, telecommunications, social media, payment processing, taxation, intellectual property, competition, electronic contracts, internet access, net neutrality, advertising, calling and texting, content restrictions, and accessibility, among others.

We cannot guarantee that we have been or will be fully compliant in every jurisdiction.

Litigation and regulatory proceedings are inherently uncertain, and the laws and regulations governing issues such as data privacy and security, payment processing, taxation, net neutrality, video, telecommunications, e-commerce tariffs and consumer protection related to the internet continue to develop.

For example, laws relating to the liability of providers of online services for activities of their users and other third parties have been tested by a number of claims, including actions based on invasion of privacy and other torts, unfair competition, copyright and trademark infringement, and other theories based on the nature and content of the materials searched, the advertisements posted, actions taken or not taken by providers in response to user activity or the content provided by users.

Congress has also enacted legislation related to liability of providers of online services and may continue to legislate in this area.

The CCPA and Nevada SPI Law also apply to entities that do business in California and Nevada, respectively, and impose a number of requirements on internet and online services.

Moreover, as internet commerce and advertising continue to evolve, increasing regulation by federal, state and foreign regulatory authorities becomes more likely.

As we develop new services and devices, and improve our streaming platform, we may also be subject to new laws and regulations specific to such technologies.

For example, in developing our Roku TV reference design, we were required to understand, address and comply with an evolving regulatory framework for developing, manufacturing, marketing and selling TVs.

If we fail to adequately address or comply with such regulations regarding the manufacture and sale of TVs, we may be subject to fines or sanctions, and our licensees may be unable to sell Roku TV models at all, which would harm our business and our ability to grow our user base.

Laws relating to data privacy and security, data localization, law enforcement access to data, encryption, and similar activities continue to proliferate, often with little harmonization between jurisdictions and limited

A number of existing bills are pending in the U.S.

Congress and other government bodies that contain provisions that would regulate, for example, how companies can use cookies and other tracking technologies to collect, use and share user information.

The CCPA also imposes requirements on certain tracking activity, and we are continuing to assess the impact of the CCPA and proposed amendments to the law on our business.

The EU already has existing laws , which are due for update in 2020, requiring advertisers or companies like ours to, for example, obtain unambiguous, affirmative consent from users for the placement of cookies or other tracking technologies and the delivery of relevant advertisements.

If we or the third parties that we work with, such as contract payment processing services, content publishers, vendors or developers violate or are alleged to violate applicable privacy or security laws, industry standards, our contractual obligations, or our policies, such violations and alleged violations may also put our users’ information at risk and could in turn harm our business and reputation and subject us to potential liability.

Any of these consequences could cause our users, advertisers or publishers to lose trust in us, which could harm our business.

Furthermore, any failure on our part to comply with these laws may subject us to liability and reputational harm.

Our use of data to deliver relevant advertising and other services on our platform places us and our content publishers at risk for claims under various unsettled laws, including the Video Privacy Protection Act (“VPPA”).

Some of our content publishers have been engaged in litigation over alleged violations of the VPPA relating to activities on our platform in connection with advertising provided by unrelated third parties.

The Federal Trade Commission has also in recent years revised its rules implementing the Children’s Online Privacy Protection Act (“COPPA Rules”) broadening the applicability of the COPPA Rules, including the types of information that are subject to these regulations, and it is currently examining whether additional changes are appropriate.

Such actions could limit the information that we or our content publishers and advertisers may collect and use through certain content publishers, the content of advertisements and in relation to certain channel partner content.

The CCPA also imposes certain opt in and opt out requirements for certain information about minors.

We and our content publishers and advertisers could be at risk for violation or alleged violation of these and other privacy, advertising, or similar laws.

Any significant disruption in our computer systems or those of third parties we utilize in our operations could result in a loss or degradation of service on our platform and could harm our business.

We rely on the expertise of our engineering and software development teams for the performance and operation of the Roku OS, streaming platform and computer systems.

Service interruptions, errors in our software or the unavailability of computer systems used in our operations could diminish the overall attractiveness of our devices and streaming platform to existing and potential users.

We utilize computer systems located either in our facilities or those of third-party server hosting providers and third-party internet-based or cloud computing services.

Although we generally enter into service level agreements with these parties, we exercise no control over their operations, which makes us vulnerable to any errors, interruptions or delays that they may experience.

In the future, we may transition additional features of our services from our managed hosting systems to cloud computing services, which may require significant expenditures and engineering resources.

If we are unable to manage a transition effectively, we may experience operational delays and inefficiencies until the transition is complete.

Upon the expiration or termination of any of our agreements with third-party vendors, we may not be able to replace their services in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us, and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.

In addition, fires, floods, earthquakes, power losses, telecommunications failures, break-ins and similar events could damage these systems and hardware or cause them to fail completely.

As we do not maintain entirely redundant systems, a disrupting event could result in prolonged downtime of our operations and could adversely affect our business.

Any disruption in the services provided by these vendors could have adverse impacts on our business reputation, customer relations and operating results.

If any aspect of our computer systems or those of third parties we utilize in our operations fails, it may lead to downtime or slow processing time, either of which may harm the experience of users.

We have experienced, and may in the future experience, service disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors and capacity constraints.

We expect to continue to invest in our technology infrastructure to maintain and improve the user experience and platform performance.

increasingly complex services and functions, increasing numbers of users, and actual and anticipated changes in technology, our business may be harmed.

Our players and Roku TV models must operate with various offerings, technologies and systems from our content publishers that we do not control.

If our streaming devices do not operate effectively with those offerings, technologies and systems, our business may be harmed.

The Roku OS is designed for performance using relatively low-cost hardware, which enables us to drive user growth with our players and Roku TV models offered at a low cost to consumers.

However, this hardware must be interoperable with all channels and other offerings, technologies and systems from our content publishers, including virtual multi-channel video programming distributors.

We have no control over these offerings, technologies and systems beyond our channel certification requirements, and if our players and Roku TV models do not provide our users with a high-quality experience on those offerings on a cost-effective basis or if changes are made to those offerings that are not compatible with our players or Roku TV models, we may be unable to increase active account growth and user engagement, we may be required to increase our hardware costs and our business will be harmed.

We plan to continue to introduce new products regularly and we have experienced that it takes time to optimize such products to function well with these offerings, technologies and systems.

In addition, many of our largest content publishers have the right to test and certify our new products before we can publish their channels on these devices.

The certification processes can be time consuming and introduce third-party dependencies into our product release cycles.

If content publishers do not certify new products on a timely basis or require us to make changes in order to obtain certifications, our product release plans may be adversely impacted, or we may not continue to offer certain channels.

To continue to grow our active accounts and user engagement, we will need to prioritize development of our streaming devices to work better with new offerings, technologies and systems.

If we are unable to maintain consistent operability of our devices that is on parity with or better than other platforms, our business could be harmed.

In addition, any future changes to offerings, technologies and systems from our content publishers, such as virtual service operators, may impact the accessibility, speed, functionality, and other performance aspects of our streaming devices.

We may not successfully develop streaming devices that operate effectively with these offerings, technologies or systems.

If it becomes more difficult for our users to access and use these offerings, technologies or systems, our business could be harmed.

If our content publishers do not continue to develop channels for our platform and participate in new features that we may introduce from time to time, our business may be harmed.

If we are unable to grow and maintain a sufficient supply of quality video ad inventory at reasonable costs to keep up with demand, our business may be harmed.

If our content publishers do not participate in new features that we may introduce from time to time, our business may be harmed.

As our streaming platform and products evolve, we will continue to introduce new features, which may or may not be attractive to our content publishers or meet their requirements.

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If content publishers do not find our streaming platform simple and attractive to develop channels for, do not value and participate in all of the features and functionality that our streaming platform offers, or determine that our software developer kit or new features of our platform do not meet their certification requirements, our business may be harmed.

If the advertising and audience development campaigns on our platform are not relevant or not engaging to our users, our growth in active accounts and streaming hours may be adversely impacted.

We have made, and are continuing to make, investments to enable advertisers and content publishers to deliver relevant advertisements and audience development campaigns to our users.

Existing and prospective advertisers and content publishers may not be successful in serving ads and audience development campaigns that lead to and maintain user engagement.

If the advertising and audience development campaigns and other promotional advertising on our platform are not relevant or not engaging to our users, our growth in active accounts and streaming hours may be adversely impacted.

We have made, and are continuing to make, investments to enable advertisers and content publishers to deliver relevant advertisement, audience development campaigns and other promotional advertising to our users.

Existing and prospective advertisers and content publishers may not be successful in serving ads and audience development campaigns and sponsoring other promotional advertising that lead to and maintain user engagement.

Those ads and campaigns may seem irrelevant, repetitive or overly targeted and intrusive.

We are continuously seeking to balance the objectives of our content publishers and advertisers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain users, content publishers and advertisers.

If we do not introduce relevant advertisements and

audience development campaigns or such advertisements and audience development campaigns are overly intrusive and impede the use of our streaming platform, our users may stop using our platform which will harm our business.

We are continuously seeking to balance the objectives of our advertisers and content publishers with our desire to provide an optimal user experience, but we may not be successful in achieving a balance that continues to attract and retain users, advertisers and content publishers.

If we do not introduce relevant advertisers, audience development campaigns and other promotional adverting or such advertisements, audience development campaigns and other promotional advertising are overly intrusive and impede the use of our streaming platform, our users may stop using our platform which will harm our business.

The Roku Channel may not continue to attract a large number of users and/or generate significant revenue from advertising, and our users may not purchase Premium Subscriptions.

We operate The Roku Channel, which offers both ad-supported free access for users to a collection of films, television series and other content as well as Premium Subscriptions, which we launched in January 2019, allowing our users to pay for ad-free content from various content publishers, all on one streaming channel.

We operate The Roku Channel, which offers both ad-supported free access for users to a collection of films, television series and other content as well as Premium Subscriptions, which allowing our users to pay for ad-free content from various content publishers, all on one streaming channel.

We have incurred, and will continue to incur, costs and expenses in connection with the development, expansion and operation of The Roku Channel, which we monetize primarily through advertising.

For example, in the first quarter of 2021, we acquired global content distribution rights, including rights to certain projects in development, from the mobile-first video distribution service known as Quibi, and announced

that The Roku Channel will become the home of such content.

If our users do not continue to stream the free, ad-supported content we make available on The Roku Channel, we will not have the opportunity to monetize The Roku Channel through revenue generated from advertising.

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Upon expiration of these agreements, we are required to re-negotiate and renew these agreements with the content owners, or enter into new agreements with other content owners, in order to obtain rights to distribute additional titles or to extend the duration of the rights previously granted.

If we are unable to enter into content license agreements on acceptable terms to access content that enables us to attract and retain users of the ad-supported content on The Roku Channel, or if the content we do secure rights to stream, including for example the content that we acquired through the Quibi transaction described above, is ultimately not appealing to our users and advertisers, usage of The Roku Channel may decline, and our business may be harmed.

Furthermore, if the advertisements on The Roku Channel are not relevant to our users or such advertisements are overly intrusive and impede our users’ enjoyment of the available content, our users may not stream content and view advertisements on The Roku Channel, and The Roku Channel may not generate sufficient revenue from advertising to be cost effective for us to operate, regardless of our ability to sell Premium Subscriptions.

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In addition, certain channels available on our platform allow users to purchase additional streaming services from within their channels.

The revenue we earn from these transactions are generally not equivalent to the revenue we earn from activations on or through our platform that we receive full attribution credit for.

The revenue we earn from these transactions is generally not equivalent to the revenue we earn from activations on or through our platform that we receive full attribution credit for.

Furthermore, for Premium Subscriptions, we only earn revenue for SVOD channels, including subscriptions to these services through The Roku Channel.

Accordingly, if users activate subscriptions for SVOD channels, including channels available as Premium Subscriptions through The Roku Channel other than on our platform, our business may be harmed.

Our revenue and gross profit are subject to seasonality and if our sales during the holiday season fall below our expectations, our business may be harmed.

Seasonal consumer shopping patterns significantly affect our business.

Specifically, 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 periods.

Furthermore, a significant percentage of our player sales through retailers in the fourth quarter 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.

Given the seasonal nature of our player sales, accurate forecasting is critical to our operations.

We anticipate that this seasonal impact on revenue and gross profit is likely to continue, and any shortfall in expected

fourth quarter revenue due to macroeconomic conditions, a decline in the effectiveness of our promotional activities, actions by our competitors or disruptions in our supply or distribution chain, tariffs or other restrictions on trade or for any other reason, would cause our full year results of operations to suffer significantly.

For example, delays or disruptions at U.S.

ports of entry could adversely affect our or our distributors’ ability to timely deliver players and co-branded Roku TV models to retailers during the holiday season.

A substantial portion of our expenses are personnel related and include salaries, stock-based compensation and benefits that are not seasonal in nature.

Accordingly, in the event of a revenue shortfall, we would be unable to mitigate the negative impact on gross profit and operating margins, at least in the short term, and our business would be harmed.

Accordingly, if users activate subscriptions for SVOD channels, including channels available as Premium Subscriptions, other than on our platform, our business may be harmed.

We operate in a rapidly evolving industry that will be impacted by many factors that our outside of our control, which makes it difficult to evaluate our business and prospects.

TV streaming is a rapidly evolving industry, making our business and prospects difficult to evaluate.

The growth and profitability of this industry and the level of demand and market acceptance for our products and streaming platform are subject to a high degree of uncertainty.

Accordingly, the future evolution of TV streaming as an industry, which is likely to impact our success, is dependent many of the factors that are outside of our control.

Changes in consumer viewing habits could harm our business.

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If new technologies render the TV streaming market obsolete or we are unable to successfully compete with current and new competitors and technologies, our business will be harmed.

To continue to increase our active accounts, we must maintain and expand our retail sales channels.

The majority of our players and our TV brand partners' 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.

To a lesser extent, we sell players directly through our website and internationally through distributors.

For the year ended December 31, 2020, Amazon, Best Buy and Walmart in total accounted for 69% of our player segment revenue.

These three retailers collectively accounted for 72% and 68% of our player revenue for the years ended December 31, 2019 and 2018, respectively.

These retailers and our international distributors also sell products offered by our competitors.

We have no minimum purchase commitments or long-term contracts with any of these retailers or distributors.

If one or several retailers or distributors were to discontinue selling our players or our TV brand partners' Roku TV models, choose not to prominently display those devices in their stores or on their websites, or close or severely limit access to their brick and mortar locations because of shutdowns related to the COVID-19 pandemic, the volume of our streaming devices sold could decrease, which would harm our business.

If any of our existing TV brands choose to work exclusively with, or divert a significant portion of their business with us to, other operating system developers, this may impact our ability to license the Roku OS and our smart TV reference design to TV brands and our ability to continue to grow active accounts.

Traditional retailers have limited shelf and end cap space in their stores and limited promotional budgets, and online retailers have limited prime website product placement space.

Any reduction in our ability to place and promote our devices, or increased competition for available shelf or website placement, could require us to increase our marketing expenditures to maintain our product visibility or result in reduced visibility for our products, which may harm our business.

If our efforts to build a strong brand and maintain customer satisfaction and loyalty are not successful, we may not be able to attract or retain users, and our business may be harmed.

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Controversies related to the content included on certain of the channels that we distribute could result in negative publicity, cause harm to our reputation and brand, or subject us to claims and may harm our business.

We are subject to payment-related risks and, if our advertisers or advertising agencies do not pay or dispute their invoices, our business may be harmed.

Many of our contracts with advertising agencies provide that if the advertiser does not pay the agency, the agency is not liable to us, and we must seek payment solely from the advertiser, a type of arrangement called sequential liability.

Contracting with these agencies, which in some cases have or may develop higher-risk credit profiles, may subject us to greater credit risk than if we were to contract directly with advertisers.

This credit risk may vary depending on the nature of an advertising agency’s aggregated advertiser base.

In addition, typically, we are contractually required to pay advertising inventory data suppliers within a negotiated period of time, regardless of whether our advertisers or advertising agencies pay us on time, or at all.

In addition, we typically experience slow payment cycles by advertising agencies as is common in the advertising industry.

While we attempt to balance payment periods with our suppliers and advertisers and advertising agencies, we are not always successful.

As a result, we can often face a timing issue with our accounts payable on shorter cycles than our accounts receivables, requiring us to remit payments from our own funds, and accept the risk of credit losses.

We may also be involved in disputes with agencies and their advertisers over the operation of our streaming platform, the terms of our agreements or our billings for purchases made by them through on our streaming platform or through our DSP.

If we are unable to collect or make adjustments to bills, we could incur credit losses, which could have a material adverse effect on our results of operations for the periods in which the write-offs occur.

In the future, bad debt may exceed reserves for such contingencies and our bad debt exposure may increase over time.

Any increase in write-offs for bad debt could have a materially negative effect on our business, financial condition and operating results.

If we are not paid by our advertisers or advertising agencies on time or at all, our business may be harmed.

The quality of our customer support is important to our users and licensees, and, if we fail to provide adequate levels of customer support, we could lose users and licensees, which would harm our business.

Our users and licensees depend on our customer support organization to resolve any issues relating to our devices.

A high level of support is critical for the successful marketing and sale of our devices.

We currently outsource our customer support operation to a third-party customer support organization.

If we do not effectively train, update and manage our third-party customer support organization to assist our users, and if that support organization does not succeed in helping them quickly resolve issues or provide effective ongoing support, it could adversely affect our ability to sell our devices to users and harm our reputation with potential new users and our licensees.

We must successfully manage streaming device and other product introductions and transitions to remain competitive.

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Moreover, the introduction of a new streaming device or other product is a complex task, involving significant expenditures in research and development, promotion and sales channel development.

For example, in 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV

models, and in 2019 we introduced our Roku Smart Soundbar and Roku Wireless Subwoofer.

For example, in 2018, we introduced our Roku TV Wireless Speakers, designed specifically for use with Roku TV models, in 2019 we introduced our Roku Smart Soundbar and Roku Wireless Subwoofer, and in 2020 we launched our Roku Streambar.

Whether users will broadly adopt new streaming devices or other products is not certain.

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the availability of materials and key components used in manufacturing;

tariffs which could impact the pricing of such devices and depress consumer demand;

tariffs and trade and export restrictions by the U.S.

or foreign governments which could impact the pricing and availability of such devices and depress consumer demand;

limit the ability of our contract manufacturers to obtain key parts, components, software, and technologies;

lead to shortages;

our ability to attract and retain world-class research and development personnel.

If any of these or other factors materializes, we may not be able to develop and introduce new products in a timely or cost-effective manner, and our business may be harmed.

We do not have manufacturing capabilities and primarily depend upon a small number of contract manufacturers, and our operations could be disrupted if we encounter problems with our contract manufacturers.

We do not have any internal manufacturing capabilities and primarily rely upon one contract manufacturer to build our players, smart soundbars and wireless subwoofers.

We similarly rely on another contract manufacturer to manufacture our wireless speakers.

We do not have manufacturing capabilities and primarily depend upon a limited number of contract manufacturers, and our operations could be disrupted if we encounter problems with our contract manufacturers.

We do not have any internal manufacturing capabilities and rely on a limited number of contract manufacturers to build our players, smart soundbars, wireless subwoofers and our wireless speakers.

Our contract manufacturers are vulnerable to:

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reduced component availability,

production disruptions or delays, including from strikes, mechanical issues, quality control issues, natural disasters, and public health crises, such as the outbreak of the coronavirus, known as COVID-19;

production disruptions or delays, including from strikes, mechanical issues, quality control issues, natural disasters, and public health crises, such as the pandemic caused by the outbreak of the coronavirus, known as COVID-19;

the impact of U.S.

or foreign tariffs on components or finished goods;

or foreign tariffs or trade restrictions on components, finished goods, software, or other products;

increases in U.S.

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foreign tariffs on U.S.

parts or components for finished players that are assembled in Asia.

parts or components for finished players or other Roku products that are assembled in Asia.

As a result, we have limited control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply or when we introduce new streaming devices or other products.

For example, during the quarter ended March 31, 2020, one of our contract manufacturers experienced extended factory closures related to the spread of COVID-19 resulting in supply chain disruptions for our players and elevated air freight costs to meet demand.

We also have limited control over our contract manufacturers’ quality systems and controls, and therefore must rely on them to manufacture our players and other products to our quality and performance standards and specifications.

Delays, component shortages and other manufacturing and supply problems could impair the retail distribution of our players and other products and ultimately our brand.

Furthermore, any adverse change in our contract manufacturers’ financial or business condition could disrupt our ability to supply our players or other products to our retailers and distributors.

Furthermore, any adverse change in our contract manufacturer’s financial or business condition could disrupt our ability to supply our players or other products to our retailers and distributors.

Our contracts with our contract manufacturers generally do not obligate them to supply our players or other products in any specific quantity or at any specific price.

In the event our contract manufacturers are unable to fulfill our production requirements in a timely manner, their costs increase because of U.S.

or international tariffs, or they decide to terminate their relationship with us, our order fulfillment may be delayed, and we would have to identify, select and qualify acceptable alternative contract manufacturers.

or international tariffs or export or import restrictions, or they decide to terminate their relationship with us, our order fulfillment may be delayed, and we would have to identify, select and qualify acceptable alternative contract manufacturers.

Alternative contract manufacturers may not be available to us when needed or may not be in a position to satisfy our production requirements at commercially reasonable prices, to our quality and performance standards or at all.

Any significant interruption in manufacturing

at one of our contract manufacturers for any reason could require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue.

In addition, our contract manufacturers' facilities are located in South East Asia and the People’s Republic of China and may be subject to political, economic, labor, trade, social and legal uncertainties that may harm our relationships with these parties.

We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, trade and export or import restrictions.

Any significant interruption in manufacturing at our contract manufacturers for any reason could require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue, or to incur higher freight costs than anticipated, which would negatively impact our player gross margin.

In addition, our contract manufacturer’s facilities are located in Southeast Asia , the People’s Republic of China and Brazil and may be subject to political, economic, labor, trade, social and legal uncertainties that may harm or disrupt our relationships with these parties.

We believe that the international location of these facilities increases supply risk, including the risk of supply interruptions, tariffs, and trade restrictions on exports or imports.

Furthermore, any manufacturing issues affecting the quality of our products, including players and audio products, could harm our business.

If either of our contract manufacturers fails for any reason to continue manufacturing our players or other products in required volumes and at high quality levels, or at all, we would have to identify, select and qualify an acceptable alternative contract manufacturer or manufacturers.

Alternative contract manufacturers may not be available to us when needed, or at all, or may not be in a position to satisfy our production requirements at commercially reasonable prices, to our quality and performance standards, or at all.

If our contract manufacturers fail for any reason to continue manufacturing our players or other products in required volumes and at high quality levels, or at all, we would have to identify, select and qualify acceptable alternative contract manufacturers.

Alternative contract manufacturers may not be available to us when needed, or at all, or may not be

in a position to satisfy our production requirements at commercially reasonable prices, to our quality and performance standards, or at all.

Any significant interruption in manufacturing at a contract manufacturer could require us to reduce our supply of players or other products to our retailers and distributors, which in turn would reduce our revenue, active account growth or streaming hour growth.

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regulations on exports of U.S.

technologies or dealings with certain countries or parties, international tariffs on U.S.

technologies or dealings with certain countries or parties, foreign tariffs on U.S.

parts or components for Roku TV models that are assembled outside of the U.S., and their control over delivery schedules, manufacturing yields and costs, particularly when components are in short supply may be limited.

Delays, component shortages and other manufacturing and supply problems could impair the retail distribution of their Roku TV models.

Delays, component shortages, factory shutdowns due to the COVID-19 pandemic and other manufacturing and supply problems could impair the retail distribution of their Roku TV models.

A significant interruption in the supply of Roku TV models to retailers and distributors could, in turn, reduce our active accounts and streaming hours.

Furthermore, any manufacturing issues affecting the quality of our Roku TV brand partners’ Roku TV models, could harm our brand and our business.

Changes in general economic conditions, geopolitical conditions, U.S.

trade policies and other factors beyond our control may adversely impact our business and operating results.

Our business is subject to risks generally associated with doing business abroad, such as U.S.

and foreign governmental regulation in the countries in which our contract manufacturers and component suppliers are located.

Our operations and performance depend significantly on global, regional and U.S.

economic and geopolitical conditions.

For example, there has been discussion and dialogue regarding potential significant changes to U.S.

trade policies, legislation, treaties and tariffs.

For example, in November 2018 the United States, Mexico, and Canada signed the United States-Mexico-Canada Agreement (“USMCA”) which supersedes the North American Free Trade Agreement.

The USMCA still must be ratified by the respective governments of each of the three countries.

Congress approved the USMCA in the United States-Mexico-Canada Agreement Implementation Act (H.R.5430) in January 2020 (the “Act”), and the Act was signed into law in January 2020.

While the Act authorizes the President to declare that the USMCA agreement has entered into force, under U.S.

practice, the Office of the U.S.

Trade Representative must review Mexico’s and Canada’s laws and regulations to ensure that both are fully in compliance with the USMCA obligations and commitments before the President issues a Presidential Proclamation declaring that the USMCA agreement has “entered into force” under U.S.

While the three countries reportedly are eager to bring the agreement into force this summer, the U.S., Canadian, and Mexican approval and entry into force processes could involve additional delays, uncertainties, or political complications.

The current U.S.

Administration also has threatened tougher trade terms with China and other countries, leading to the imposition of substantially higher U.S.

Section 301 tariffs on roughly $380 billion of imports from China.

In response, China has imposed higher Chinese tariffs on a large amount of U.S.

exports to China, which could affect the prices of U.S.

origin parts or components of our products assembled in China.

In January 2020, the U.S.

and China signed a “Phase One” trade deal pursuant to which, among other things, the U.S.

will modify its

Section 301 tariff actions.

As part of the Phase One agreement, the U.S.

canceled additional Section 301 duties that were originally scheduled to go into effect in December 2019 on certain imported products, including certain of our products, and reduced the duties on certain other imported products, including televisions assembled in China by Roku TV brand partners, from 15% ad valorem to 7.5%.

At this time, it is unknown whether and to what extent the USMCA will be ratified by Canada;

whether the Phase One deal will last or whether there will be sufficient progress on Phases Two and Three to lead to a further reduction in U.S.-China trade tensions:

whether additional Section 301 tariffs will be imposed on Roku products, imported from China and, if so, how long U.S.

tariffs on Chinese goods will remain in effect or whether even higher tariffs will be imposed, or new regulatory proposals to restrict trade will be adopted;

whether international trade agreements will be negotiated or existing free trade agreements re-negotiated;

whether new trade or tariff actions will be announced by the current Administration;

or the effect that any such action would have, either positively or negatively, on our industry or our business or licensees.

If any new legislation and/or regulations are implemented, or if existing trade agreements are renegotiated or terminated, or if tariffs are imposed on foreign-sourced or U.S.

goods, it may be inefficient and expensive for us to alter our business operations in order to adapt to or comply with such changes, and higher prices could depress consumer demand.

Such operational changes could have a material adverse effect on our business, financial condition, results of operations or cash flows.

Also, various countries, in addition to the United States, regulate the import and export of certain commodities, software, and technology, including import and export licensing requirements, and have enacted laws that could limit our ability to distribute our products, or collaborate on technology with our commercial or strategic partners, or could limit our commercial and/or strategic partners’ ability to implement our products in those countries.

Changes in our products or future changes in export and import regulations may create delays in the introduction of our products in international markets, prevent our commercial and/or strategic partners with international operations from deploying our products globally or, in some cases, prevent the export or import of our products to certain countries, governments, or persons altogether.

Any change in export or import regulations, the imposition of customs duties on intangible goods such as cross-border data flows which are currently duty-free under the WTO’s temporary e-commerce moratorium which faces opposition from certain WTO Members when it comes up for extension at the WTO Ministerial Meeting in June, digital services taxes which potentially could expose certain digital services to new taxes, economic sanctions or related legislation, increased export and import controls stemming governmental policies, or change in the countries, governments, persons or technologies targeted by such regulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or new customers in international markets or source components and parts from certain suppliers.

Any decreased use of our products or limitation on our ability to export or sell our products, or source parts and components, would harm our business.

Further, following the result of a referendum in 2016, the United Kingdom formally left the EU on January 31, 2020.

The United Kingdom’s withdrawal from the EU is commonly referred to as “Brexit.” Pursuant to the withdrawal arrangements agreed to between the United Kingdom and the EU, the United Kingdom is subject to a transition period until December 31, 2020, during which EU rules will continue to apply (the “Brexit Transition Period”).

Negotiations between the United Kingdom and the EU are expected to continue in relation to the customs and trading relationship between the United Kingdom and the EU following the expiry of the Brexit Transition Period.

The effects of Brexit have been and are expected to continue to be far-reaching.

Brexit and the perceptions as to its impact may adversely affect business activity and economic conditions globally and could continue to contribute to instability in global financial markets.

Brexit could also have the effect of disrupting the free movement of goods, services, and people between the United Kingdom and the EU.

In addition, Brexit could lead to legal uncertainty and potentially divergent national laws and regulations as the United Kingdom determines which EU laws to replace or replicate.

The full effects of Brexit are uncertain and will remain so until after the Brexit Transition Period and the United Kingdom and EU reach a definitive resolution with regards to outstanding trade and legal matters.

Given these possibilities and others we may not anticipate, as well as the lack of comparable precedent, the full extent to which our business, results of operations, and financial condition could be adversely affected by Brexit is uncertain.

The supply chains of our contract manufacturers’ and many of our licensees may source products, parts or components from China, countries near China and the region.

There are many uncertainties around COVID-19, including scientific and health issues, the unknown duration and extent of economic disruption in China and other

markets, and the impact, if any, on the Chinese, U.S., and global economies.

As a result, COVID-19 may result in supply shortages of our products or our licensee’ products, c our ability or our licensees’ ability to import, export or sell streaming devices to customers in U.S.

and international markets.

Any decrease, limitations or delays on our or our licensees’ ability to import, export, or sell our streaming devices would harm our business.

If we fail to accurately forecast our manufacturing requirements and manage our inventory with our contract manufacturers, we could incur additional costs, experience manufacturing delays and lose revenue.

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If we fail to accurately forecast our manufacturing requirements, our business may be harmed.

Our players incorporate key components from sole source suppliers and if our contract manufacturer is unable to source these components on a timely basis, due to fabrication capacity issues or other material supply constraints, we will not be able to deliver our players to our retailers and distributors.

Our players incorporate key components from sole source suppliers and if our contract manufacturers are unable to source these components on a timely basis, due to fabrication capacity issues or other material supply constraints, we will not be able to deliver our players to our retailers and distributors.

We depend on sole source suppliers for key components in our players.

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Although this approach allows us to maximize player performance on lower cost hardware, reduce engineering qualification costs and develop stronger relationships with our strategic suppliers, this also creates supply chain risk.

These sole-source suppliers could be constrained by fabrication capacity issues or material supply issues, such as tariffs on U.S.

parts or components for finished players that are used in final assembly of their components, or the risk that the strategic supplier may stop producing such components, cease operations or be acquired by, or enter into exclusive arrangements with, our competitors or other companies.

Such suppliers may also face production, shipping, or logistical constraints arising from COVID-19.

These sole-source suppliers could be constrained by fabrication capacity issues or material supply issues, such as tariffs or other export or import restrictions on U.S.

parts or components for finished players that are used in final assembly of their components or on the finished players themselves.

There is also the risk that the strategic supplier may stop producing such components, cease operations or be acquired by, or enter into exclusive arrangements with, our competitors or other companies, or become subject to U.S.

or foreign sanctions or export control restrictions or penalties.

Such suppliers may also face production, shipping, or logistical constraints arising from the COVID-19 pandemic.

Any such interruption or delay may force us to seek similar components from alternative sources, which may not be available.

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Any interruption in the supply of sole-source components for our players could adversely affect our ability to meet scheduled player deliveries to our retailers and distributors, result in lost sales and higher expenses and harm our business.