Roku's $1 billion upfront record attempts to obscure economy slowdown

The stronger-than-expected TV upfront market is crashing into a stronger-than-expected slowdown in ad spending.

Why it matters: The hefty ad commitments — where no money is actually changing hands yet — may have obscured the fact that the current situation is much more dire.

Driving the news: Roku was hammered on its earnings Thursday after it badly missed expectations and forecasted weaker growth. Roku blamed "a significant slowdown" in TV ad spending for its poor performance.

• At the same time, Roku said it surpassed $1 billion in upfront ad commitments for the 2022-2023 TV season.
• Roku's stock plummeted more than 20% in after-hours trading. It opened Friday at $66.15, whereas Thursday's opening was $85.79.

Catch up quick: It was only a few weeks ago that media giants were happily telling the press about how well they did in the upfronts.

• Disney said it secured a record $9 billion in advertising commitments, and 40% of that went to streaming and digital. NBCUniversal and Paramount also reported strong numbers.

What's next: Roku CEO Anthony Wood still sees more dollars out there as the space gets more competitive (Disney+, Netflix).

• Roku pointed out that only 22% of TV ad budgets go toward streaming. Meanwhile, more than 50% of all TV viewing happens on streaming.
• "It makes streaming ads even more mainstream," Wood said during the company's earnings call. "It will grow the industry.”

What they're saying: "While the company was clear that a consumer slowdown in player sales were to blame, we think the scale of this deceleration and downgrade of 3Q 2022 expectations speaks to the relative uneasiness of Roku's core advertising clients," MoffettNathanson's Michael Nathanson wrote in a Friday analyst note.