Streaming device and platform provider Roku plans to cut 200 jobs in the U.S. as it looks to curb the rise of operating expenses, the company disclosed Thursday, citing economic conditions in the industry.
Roku expects the layoffs to reduce the company’s headcount expenses by an estimated 5%. Roku pointed to current economic conditions as driving the decision to reduce staff. Roku has a large advertising business, and the TV ad market has weakened amid an economic downturn, some of which was seen in Roku’s most recent quarterly earnings report.
“Taking these actions now will allow us to focus our investments on key strategic priorities to drive future growth and enhance our leadership position,” Roku said in a statement released today.
As of December 31, 2021, Roku employed approximately 3,000 full-time workers across 13 countries.
According to an 8-K filed November 17 with the SEC, the company estimates incurring around $28 million to $31 million in charges in connection with the job cuts, mainly related to severance payments, notice pay and employee benefits contributions. Roku anticipates most of the charges in the fourth quarter, with layoffs substantially completed by the end of the first quarter 2023.
During Roku’s third quarter earnings results, executives warned investors of a difficult Q4 ahead.
“The first thing companies do in the face of such uncertainty is cancel their ad budgets. Big advertisers that we traditionally get spend from are not spending this quarter,” said Roku CEO Anthony Wood. “They aren’t spending with anyone. It’s not just they’re not spending with us.”
In Q3 Roku’s platform revenue, which includes advertising on the home screen and on The Roku Channel free ad-supported streaming TV service, accounted for $670 million of its total $761.4 million net revenue. Roku in quarterly results noted that the traditional TV ad scatter market (TV ads bought during the period) was down 38% year over year in the U.S.
In its Q3 letter to shareholders, Roku said significant increases in quarterly operating expenses were largely the result “of robust hiring in late 2021 and early 2022 when we believed that the economy was emerging out pandemic-related disruptions, and we were accelerating investments that we had previously deferred.”
At the time, the company said it had started to significantly slow its rate of hiring and other expense growth in late Q2, and it expected to continue to slow headcount and stem rising operating expenses in response to the macro environment.
Also pointing to a challenging ad environment, Warner Bros. Discovery CEO David Zaslav this week said the ad market is currently weaker than at any time during the spending slowdown amid the 2020 pandemic. Speaking at an investor conference, Zaslav said that if conditions don’t improve it would be difficult for WBD to hit 2023 earnings target.
Roku isn’t the only company trimming staff. Deadline on Thursday reported that layoffs are happening at Paramount Global, expected to impact under 100 U.S. employees, with cuts primarily focused in the ad sales group.
Meanwhile, Disney last week warned of layoffs and a hiring freeze as part of a series of cost-cutting measures, but has not detailed specifics.
However, it may not be all bad news for connected TV. A new IAB survey of buy-side brands and agencies found advertisers expect to increase spending on connected TV in 2023, with media investments in the channel anticipated to grow 14.4% year over year.