A new report suggests that Roku may be in talks to be acquired by Netflix, following a difficult year in which Roku’s shares have dropped about 80% since July last year.
The news comes through Business Insider (opens in new tab) which claims that sources familiar with the matter have said that Roku has been discussing a Netflix acquisition in the “last few weeks”.
Adding more fuel to the fire, there are reports that Roku has closed its stock trading window for all employees.
Normally, employees could freely sell any stock now, but Roku has discontinued that ability.
These actions are typically reserved for when a company is about to release details that could have a big impact on its share price and to avoid insider trading – a practice where employees with private information buy or sell their stock just before an ad and profit unfairly.
Why would Netflix buy Roku?
The big question we’re sure many of you are asking is: why?
An easy first guess might be that Netflix wants to develop its own streaming. Roku has a track record of some of the best streaming sticks on the market like the Roku Express (2019) as well as 4K offerings like the Roku Streaming Stick+ or Roku Streaming Stick 4K (2021). As such, it would be a great partner in this field.
Roku has also partnered with brands such as Hisense (with Hisense Roku TV) and TCL (with TCL 5-Series 2020 QLED TV), both with Roku’s streaming platform built in. Netflix may be looking to make its own Netflix TVs, just as telecoms company Sky did in the UK with Sky Glass.
But if Netflix has its own streaming stick, it would be strange if it didn’t offer this hardware some sort of exclusivity to its streaming content. Given that his subscriber numbers aren’t where he wants them to be, that wouldn’t be a smart idea. Netflix needs to make access to its content as easy as possible and maximize the number of viewers, not restricting them by forcing us to buy a specific device.
Instead, it seems much 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 who like to watch – just like the tiers of rival platforms Hulu and HBO Max.
Speaking during a recent conference call interview, Netflix CEO Reed Hastings revealed that the streaming service is now “fairly open” to shake up its business model in an effort to increase revenue and create the lowest-price option for new and existing subscribers.
Hastings told investors that while he is “against the complexity of advertising,” he is a big fan of “consumer choice.” He adds, “Allowing consumers who would like to have a lower price and are tolerant of advertising to get what they want makes a lot of sense.”
But why involve Roku? Well, according to the same Business Insider report, Roku earned seven times more from ads in its first quarter of this year than it did from selling hardware.
Roku knows how to deliver ads with video-on-demand content and its rating 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 one of the companies speaks publicly about them. We have yet to receive a response from Roku, but a Netflix representative declined to comment saying, “[Netflix doesn’t] comment on rumors or speculation.”
Fortunately, we won’t have to wait much longer before we hear more, as the signs strongly suggest that we’ll hear some sort of news from Roku in the near future. If the acquisition is announced and approved, the cheaper, ad-supported tier of Netflix could arrive soon.