Netflix could be about to buy the streaming stick manufacturer Roku
Following a difficult year in which Roku’s stock has dropped by approximately 80% since July last year, a fresh report says that the company is in talks to be acquired by Netflix. According to Business Insider(opens in new tab), Roku has been contemplating a Netflix acquisition in “recent weeks,” according to persons familiar with the matter. Reports that Roku has stopped its stock trading window for all employees are adding fuel to the fire. Employees would normally be able to sell any of their stock at any time, but Roku has put a stop to that. Such actions are typically reserved for when a company is about to release information that could have a significant impact on its stock price, as well as to avoid insider trading – the practice of employees with private information buying or selling their stock right before an announcement and profiting unfairly.
Why would Netflix want to acquire Roku?
A simple initial thought is that Netflix is working on its own streaming stick. Roku has a long history of producing some of the greatest streaming sticks available, like the Roku Express (2019) and 4K versions like the Roku Streaming Stick+ or Roku Streaming Stick 4K. (2021). As a result, it would be an excellent partner in this area. Roku has also partnered with Hisense (with the Hisense Roku TV) and TCL (with the TCL 5-Series 2020 QLED TV), both of which include built-in Roku streaming platforms. Netflix may be considering producing its own Netflix TVs, similar to what Sky did in the United Kingdom with Sky Glass.
However, if Netflix has its own streaming stick, it would be strange if it didn’t give this gear access to Netflix’s streaming material exclusively. This isn’t a good idea because its subscription levels aren’t where it wants them to be. Netflix should make it as simple as possible to access its material in order to increase viewer numbers, rather than confining us by requiring us to purchase a certain gadget. Instead, it appears that Netflix is after Roku’s advertisements.
It’s no secret that Netflix plans to introduce advertisements to its service, with a lower-cost tier for those willing to put up with them, similar to the levels offered by rival platforms Hulu and HBO Max. Netflix CEO Reed Hastings indicated during a recent earnings call interview that the streaming service is now “very open” to shaking up its business model in order to boost revenue and offer lower costs to new and existing members.
While Hastings is “against the complexity of advertising,” he is a huge supporter of “customer choice,” he told investors. “It makes a lot of sense to allow consumers who would prefer a lower price and are advertising tolerant to obtain what they want,” she adds. But what’s the point of involving Roku? According to the same Business Insider report, Roku made seven times as much money from advertisements as it did from hardware sales in the first quarter of this year.
Roku knows how to mix commercials with video-on-demand programming, and its stock is trading at a record low. Netflix couldn’t ask for a better acquisition target. We must take these reports with a grain of salt until either firm talks publicly about them, as we must with all conjecture. We haven’t heard back from Roku yet, but a Netflix spokeswoman said, “[Netflix] doesn’t comment on rumors or speculation.”
Hopefully, we won’t have to wait long for more information, since all indications point to some sort of Roku news in the near future. If the deal is announced and completed, Netflix’s lower-cost ad-supported tier could be available soon.
