#377: Streaming Is Disrupting Traditional Media, & More

Last week, Roku reported[1] better-than-expected revenue and earnings for the second quarter. Given its strong revenue growth, expanding user base, and steady gains in market share, we believe that the Roku platform is causing and capitalizing on dramatic shifts in media consumption. Investors interested in learning more about ARK’s Roku research are welcome to access our open-source Roku model and blog.[2]

Disrupting Traditional TV Viewing
Streaming was transforming the TV industry during the second quarter:

• Global Streaming Hours: Roku’s global streaming hours grew by 21% year-over-year,[3] while traditional TV viewing in the US declined by 13%, as reported by Nielsen.
• Ad Spend on Traditional TV: Traditional TV ad spend declined 9.4% year-over-year, while the spot, or scatter, ad market dropped 17.2% year-over-year, according to SMI data. In contrast, Roku’s platform revenue increased 11%.[4]

Roku’s User Engagement And Expansion During The Second Quarter

• Active Accounts: active accounts increased by 1.9 million to reach 73.5 million, up 16% year-over-year. Roku also gained share across the range of TV sizes. The large screen segment grew ~70% year-over-year,[5] pushing the Roku operating system’s (OS) already leading TV OS even higher into #1 territory in the US.
• Streaming Hours on The Roku Channel: streaming hours on The Roku Channel grew by more than 50% year-over-year and, according to Nielsen, represented 1.1% of total US TV viewing in May, ranking The Roku Channel alongside Peacock and close to HBO Max.

Last week, Cruise announced[6] that it will begin testing robotaxis in Nashville, marking the seventh city for expansion in the last year. CEO Kyle Vogt explained that Cruise has redesigned system components that enable its vehicles to adapt rapidly to new environments. Cruise also is offering public nighttime robotaxi service in several of the cities—San Francisco, Austin, and Phoenix—with plans to launch in Houston and Dallas later this year.[7] While a significant portion of the mature San Francisco fleet operates 24/7, only employees can ride during daytime hours, subject to local regulations.[8] While its expansion to new cities will give Cruise more “corner cases” to train its vehicles for full autonomy, more important in the race will be the speed at which Cruise will be able to launch public commercial services at scale.

Cruise is not alone in its effort, as Waymo has launched its service in ~25 cities including San Francisco, Los Angeles, and Phoenix,[9] the latter running a public service 24/7. Today, Cruise and Waymo each run ~10,000 customer trips per week with ~400 cars on the road[10]—key metrics to watch as both try to scale. Cruise has accelerated its launch time from 9 years in San Francisco to only 3 months in the new cities,[11] but is waiting for the National Highway Traffic Safety Administration (NHTSA) to approve its plan to deploy ~2,500 autonomous vehicles without human controls per year.[12]

While it has yet to launch its robotaxi service, Tesla could have a scale advantage over peers, thanks to millions of customer-driven Teslas already benefiting from over-the-air software updates and creating an enormous data advantage. Cruise and Waymo have been making regulatory strides toward autonomous transportation during the past decade, which could mean that they paved the way for a large and looming competitor.

Last week, Worldcoin (WLD)—an ERC-20 token[13] on the Ethereum network—launched[14] with an initial supply cap of 10 billion, an inflation rate of ~1.5% per year, and a maximum circulating supply of 143 million. Founded by OpenAI’s Sam Altman whose mission[15] is to build “the world’s largest identity and financial network as a public utility, giving ownership to everyone,” WLD launched at $1.87 USD per token.

To participate in the project, users must download the World App, register their eye irises with an “orb” that assigns them unique identities with blockchain immutability. Because the WLD token is accessible to users willing to register their personal irises—“simply for being a unique human”[16]—Worldcoin claims that WLD will enable the fair distribution of supply as users participate in a global economic system that will offer universal basic incomes (UBI).

Worldcoin’s critics recognize and warn against the privacy and security issues [17] associated with relinquishing biometrics to a cryptographic database. The promise of fair distribution also raises concerns[18] because currently market makers control ~95% of WLD’s circulating supply. Vitalik Buterin, Founder of Ethereum, addressed[19] these issues publicly.

Altman’s project also has been accused of predatory schemes incorporating “deception […] and cash handouts”[20] while onboarding low-income populations like those in Indonesia, Kenya, Sudan, and Ghana. An investigation conducted by the MIT Technology Review revealed, wide gaps between Worldcoin’s public messaging, which focused on protecting privacy, and what users experienced. We found that the company’s representative used deceptive marketing practices, collected more personal data than it acknowledged, and failed to obtain meaningful informed consent.

On-chain analyst ZachXBT also pointed out[21] that “verification that you’re a real person seems to only currently be enforced at the enrollment level. This has led to the emergence of a black market of accounts.”

In our view, Worldcoin departs significantly from the foundational ethos of crypto, a technology dedicated to financial privacy, censorship resistance, and hedges against counterparty risk.

[1] Motley Fool Transcribing. 2023. “Roku (ROKU) Company Q2 23 Earnings Call Transcript.” https://www.fool.com/earnings/call-transcripts/2023/07/28/roku-roku-q2-2023-earnings-call-transcript/.
[2] Grous, N. and Kim, A. 2022. “ARK’s Expected Value For Roku in 2026: $605 Per Share.” ARK Investment Management LLC. https://ark-invest.com/articles/analyst-research/ark-roku-model-2026/.
[3] Roku. 2023. “Shareholder Letter.” https://image.roku.com/c3VwcG9ydC1B/2Q23-Shareholder-Letter-Final.pdf.
[4] Roku. 2023. “Shareholder Letter.” https://image.roku.com/c3VwcG9ydC1B/2Q23-Shareholder-Letter-Final.pdf.
[5] Roku. 2023. “Shareholder Letter.” https://image.roku.com/c3VwcG9ydC1B/2Q23-Shareholder-Letter-Final.pdf.
[6] Vogt, K. 2023. “Today We Are Announcing Nashville.” Twitter. https://twitter.com/kvogt/status/1684601985591590912?s=20.
[7] Zuvanich, A. 2023. “Cruise plans to launch driverless ride-hailing service in Houston.”. https://www.houstonpublicmedia.org/articles/technology/2023/05/10/451393/cruise-houston-driverless-ride-hailing-service/; Qulllan, A. 2023. “Ready to roll? A new driverless ride-hailing company is coming to Dallas.” Houston Public Media. NBC News DFW. https://www.nbcdfw.com/news/local/ready-to-roll-a-new-driverless-ride-hailing-company-is-coming-to-dallas/3297760/.
[8] Bellan, R. 2023a. “Cruise, Waymo near approval to charge for 24/7 Robotaxis in San Francisco.” TechCrunch. https://techcrunch.com/2023/05/18/cruise-waymo-near-approval-to-charge-for-24-7-robotaxis-in-san-francisco/; Seeking Alphas Transcripts. 2023. “General Motors (GM) Company Q2 23 Earnings Call Transcript.” https://seekingalpha.com/article/4619616-general-motors-company-gm-q2-2023-earnings-call-transcript.
[9] Waymo. 2023. “Doubling down on Waymo One.” https://waymo.com/blog/2023/07/doubling-down-on-waymo-one.html; Waymo Team. 2023. “Waymo reaches 5 million self-driven miles.” Medium. https://medium.com/waymo/waymo-reaches-5-million-self-driven-miles-61fba590fafe.
[10] Ludlow, E. “Waymo, Cruise Driverless Cars Are Suddenly All Over San Francisco.” Bloomberg. https://www.bloomberg.com/news/newsletters/2023-06-21/waymo-cruise-driverless-cars-could-become-part-of-life-in-san-francisco; Seeking Alphas Transcripts. 2023. “General Motors (GM) Company Q2 23 Earnings Call Transcript.” https://seekingalpha.com/article/4619616-general-motors-company-gm-q2-2023-earnings-call-transcript; Bellan, R. 2023b. “Waymo’s self-driving cars will be available on Uber’s app, starting In Phoenix.” TechCrunch. https://techcrunch.com/2023/05/23/waymos-self-driving-cars-will-be-available-on-ubers-app-starting-in-phoenix/.
[11] Crowe, S. 2022. “Cruise opens driverless robotaxi service to SF public.” The Robot Report. https://www.therobotreport.com/cruise-opens-driverless-robotaxi-service-sf-public/; Ziegler, C. 2016. “GM aims to speed up self-driving car development by buying Cruise Automation.” The Verge. https://www.theverge.com/2016/3/11/11195808/gm-cruise-automation-self-driving-acquisition; Krafcil, J. 2019. “Our Tenyearchallenge.” Twitter. https://twitter.com/johnkrafcik/status/1085944196186304512.
[12] Shephardson, D. 2023. “US to decide on GM request to deploy self-driving cars.” Reuters. https://www.reuters.com/business/autos-transportation/us-decide-whether-ok-gm-self-driving-car-deployment-plan-2023-07-12/.
[13] An ERC-20 token—short for “Ethereum Request for Comment 20”—is a standard for smart contracts created on the Ethereum network, defining the set of rules for the development of digital tokens.
[14] Worldcoin. 2023. “Worldcoin Tokenomics.” https://whitepaper.worldcoin.org/tokenomics. Note: Due to US regulations, this Whitepaper is not accessible online to readers in the United States.
[15] Worldcoin. 2023. “Worldcoin Tokenomics.” https://whitepaper.worldcoin.org/tokenomics. Note: Due to US regulations, this Whitepaper is not accessible online to readers in the United States.
[16] Worldcoin. 2023. “Worldcoin Tokenomics.” https://whitepaper.worldcoin.org/tokenomics. Note: Due to US regulations, this Whitepaper is not accessible online to readers in the United States.
[17] Bailey, A. et al. 2023. “Worldcoin isn’t as bad as it sounds: It’s worse.” Blockworks. https://blockworks.co/news/worldcoin-privacy-concerns.
[18] Rhama, B. and Washburn, M. 2023. “Beyond the Hype: These Are the Real Concerns with WorldCoin (WLD).” https://beincrypto.com/worldcoin-wld-privacy-risk/.
[19] Buterin, V. 2023. “What to I think of Biometric Proof Of Personhood?” https://vitalik.eth.limo/general/2023/07/24/biometric.html.
[20] Guo, E. and Renaldi, A. 2023. “Deception, Exploited Workers, and Cash Handouts: How Worldcoin Recruited Its First Half A Million Test Users.” MIT Technology Review. https://www.technologyreview.com/2022/04/06/1048981/worldcoin-cryptocurrency-biometrics-web3/.
[21] ZachXBT. 2023. “Verification that you’re a real person seems to only currently be enforced at the enrollment level.” Twitter. https://twitter.com/zachxbt/status/1683512572668960769.