A new report suggests that Roku may be in negotiations to be acquired by Netflix, following a tough year that has seen Roku's stock drop by about 80% since July last year.
The news comes via Business Insider which claims that sources familiar with the subject said that Roku has been discussing a Netflix acquisition in “recent weeks.”
Adding further fuel to the fire are reports that Roku has closed its stock trading window for all employees.
Normally employees would be able to freely sell any of their stock right now, but Roku has halted this ability.
Such actions are normally reserved for when a company is about to release details that could have a big impact on its stock price and to avoid insider trading – a practice where employees with private information buy or sell their stock right before an announcement and profit unfairly.
Why would Netflix buy Roku?
The big question we are sure many of you are asking is: why?
An easy first guess could be that Netflix wants to develop its own streaming stick. Roku has a history-making some of the best streaming sticks out there with the likes of the Roku Express (2019), as well as 4K offerings like the Roku Streaming Stick+ or Roku Streaming Stick 4K (2021). As such, it would make a great partner in this field.
Roku has also entered partnerships with brands like Hisense (with the Hisense Roku TV) and TCL (with the TCL 5-Series 2020 QLED TV) both of which have Roku's streaming platform built-in. Netflix could be looking to make its own Netflix TVs just like the telecommunications company Sky has done in the UK with Sky Glass.
But if Netflix has its own streaming stick it would be odd if it then didn’t offer this hardware some kind of exclusivity to its streaming content. Given that its subscriber numbers aren’t where it wants them to be this wouldn’t be a smart idea. Netflix needs to make it as easy as possible to access its content and maximize viewer numbers, not restricting them by forcing us to buy a specific device.
Instead, it seems far more likely that Netflix is after Roku’s ads.
It’s no secret that Netflix wants to bring ads to its service, offering a cheaper tier for those happy to sit through them – just like tiers for rival platforms Hulu and HBO Max.
Speaking during a recent earnings call interview, Netflix CEO Reed Hastings revealed that the streaming service is now “quite open” to shaking up its business model in an effort to both drive revenue and create the option of lower prices for new and existing subscribers.
Hastings told investors that while he’s “against the complexity of advertising” he’s a big fan of “consumer choice.” Adding “allowing consumers who would like to have a lower price and are advertising tolerant get what they want makes a lot of sense.”
But why get Roku involved? Well according to the same Business Insider report, Roku made seven times as much from advertisements in its first quarter this year as it did from selling hardware.
Roku knows how to deliver ads with video-on-demand content and its valuation is at an all-time low. It couldn’t be a better acquisition target for Netflix.
As with all speculation we have to take these reports with a pinch of salt until either company speaks publicly about them. We've yet to hear back from Roku but a Netflix representative declined to comment saying "[Netflix doesn't] comment on rumors or speculation."
Hopefully, we won't have to wait too much longer before we hear more as the signs strongly suggest we’ll hear some kind of Roku news in the near future. If the acquisition does get announced and go through, then Netflix’s cheaper ad-supported tier could be arriving soon.
