Netflix Buying Out A Major Streaming Competitor?

By Charlene Badasie | 3 weeks ago

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Despite its popularity, Netflix has been facing a few new challenges recently. For the first time in more than a decade, the streamer lost 200,000 subscribers in the first quarter. If that wasn’t bad enough, the company’s share value dropped by more than 25% as a result. Undeterred by these setbacks, the platform is now looking at ways to expand its business model with the acquisition of Roku. Based in San Jose, California, the company is known for creating various digital media players for video streaming. It also licenses its hardware and software to other companies.

According to Business Insider, Netflix is rumored to be in negotiations with the firm whose stock drop by about 80% since July last year. A source familiar with the deal told the publication that talks have been ongoing in recent weeks. Another catalyst for the buyout buzz has been reports of the leading smart TV operating system closing a trading window for employees to sell vested shares in the company. Staff would normally be able to sell their stock at any time, but Roku has halted all transactions. These types of restrictions are usually put in place when a company is about to release information that could have a significant impact on its stock price. It also helps to thwart insider trading.

As Netflix proceeds with the deal, it’s worth noting that Roku is much more than the company’s namesake set-top box. It’s also the leading aggregator of both paid and ad-supported streaming services, with more than 10,000 streaming channels gathered in one place, The Motley Fool reports. Its impressive position helped the company to attract more than 61 million active household accounts. As a result, the tech outfit’s bargaining power with streaming services supported by advertising increased.

If Netflix does eventually acquire Roku, the first order of business for the streamer will probably be its own streaming stick. The digital technology manufacturer has a long history of producing some of the greatest streaming sticks available. This includes the Roku Express in 2019, and 4K versions like the Roku Streaming Stick+ or Roku Streaming Stick 4K which was released in 2021. So, the budding partnership really would be a match made in heaven.

According to WatchinNZ, Netflix may also be considering producing its own televisions. This would be like something Sky did in the United Kingdom with Sky Glass. Further speculation suggests that the streamer has its eye on the tech company’s advertising prowess. This is pretty plausible since the platform plans to introduce adverting to its service, on a lower-cost tier – much like their rivals Hulu and HBO Max.

The acquisition is also in line with CEO Reed Hastings’ sentiments during a recent earnings call where he said Netflix is “very open” to shaking up its business model to boost revenue and offer lower costs to new and existing members. Although he’s not a fan of the complexity of advertising, he hugely supports customer choice. “It makes a lot of sense to allow consumers who would prefer a lower price and are advertising tolerant to obtain what they want,” he told investors via WatchinNZ.