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As Netflix plans for advertising, Roku acquisition rumors swirl

As Netflix plans for advertising, Roku acquisition rumors swirl

Interpret’s VideoWatch data shows that over half of Roku users currently subscribe to Netflix.

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Rumors have been circulating that Netflix is in talks to purchase Roku, the streaming box hardware, smart TV OS, and free ad-supported television (FAST) streaming provider. While it is merely speculation at this point, industry executives point to several facts that support this rumor.

In addition to the fact that Roku originally sprung from the streaming giant, Netflix has also declared its intent to offer an ad-supported tier to its subscription service. However, the premium provider does not have the staff, technology, or experience for working with ads. Netflix is reportedly in talks with both Roku and Comcast to license their advertising technology. Some hold that by purchasing Roku, Netlfix could fast-track its development of an ad platform for the new tier by acquiring Roku’s ad server technology and sales force.

However, Wall Street analysts aren’t buying it. Much of Roku’s existing ad business is from other streaming platforms—including Paramount+, Disney+, and HBO Max. As a platform-agnostic streaming hardware producer offering a variety of streaming services through its smart TV partnerships, set-top boxes, and streaming sticks, it makes sense for Roku to promote other streaming networks. It seems unlikely that Netflix would be willing to promote competitors on its own platform.

From Roku’s perspective, the value of its streaming hardware could be compromised. Roku devices give users access to a number of streaming services through Roku apps. If it became a Netflix-owned hardware and other services stopped supporting Roku (either because Netflix blocked them or they did not want to support Netflix or share their customer data with Netflix), the value of Roku hardware would be greatly diminished.

That said, Netflix has indicated its intent to launch an advertising-supported tier this year. Unlike Disney, who can leverage its experience and technology from Hulu to bring advertising to Disney+, Netflix does not have any expertise or technology to start from in putting together an ad-supported tier. An acquisition or partnership agreement with an existing tech company with advertising experience and infrastructure could help support and launch an advertising tier more quickly—whether that is with Roku, Comcast, or someone else.

There are already strong synergies between the Roku user base (those who either own a Roku device or watched full-length movies or TV shows on The Roku Channel) and Netflix, as over half (54%) of Roku users subscribe to Netflix, according to Interpret’s VideoWatch®. For Roku users, Netflix is only a few percentage points behind Hulu.

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