Why Netflix Will Not Buy Roku
Another week, another streaming rumor blown completely out of proportion. To Roku users let me say one thing. Relax. Your favorite streaming device is not going to lose all of its free streaming channels. If you are wondering what we are talking about, it’s the latest hot story in streaming, that Netflix is looking to buy Roku. I seriously doubt the streaming company is going to buy the platform company. The story that has been pushed looks like an attempt to change the narrative around Roku which has gotten some bad press in the wake of a drop in its stock price. As Fierce Media reported, “Tuesday’s report by Insider renewed the market’s interest in Roku, sending its stock price over $100 a share for the first time since May 5. Its stock price is up for the week by 13% as financial experts weigh the possibility of a tie-up with Netflix.”
Fierce Media further pointed out that the article had few details on the supposed sale nor did it quote anybody by name or who was even talking about the issue. The uptick in the stock price makes the whole thing feel a little suspicious. I don’t think Roku is pushing the story but I think that somebody who has something to gain by manipulating the stock market may be.
And as is usual, every headline touting the supposed interest is based on the same unsubstantiated account from Business Insider. When there are multiple publications reporting a story, some readers think “well look at all the people saying it, it must be true”. Keep in mind, a lot of people said that the year 2000 would lead to all of our computers self-destructing too.
Not that Netflix or Roku would openly admit it if they were going to do something before they had to file the actual paperwork on such a transaction, but the story has the feel of a slow news cycle story.
One should ask the question, why would Netflix go in that direction? The argument that some are making is that it would give Netflix a bully platform to market their content. This is not incorrect. Some speculate that it would help Netflix navigate adding advertisements to its content. Again this is logical, but Netflix can hire its own advertising people. It is not as though Roku invented the whole idea.
If a merger between Roku and Netflix came off, it would also be the kind of merger that puts two entities that do completely different things together. And we have seen again and again that this does not work. There was a good reason that Roku, which started as a Netflix project to bring streaming to TVs in the first place ended up being a totally separate company.
All over the communications and entertainment industry, we are seeing companies untangle odd pairings. AT&T thought it could get ahead by buying into TV channels and distribution platforms and found itself trying to force square pegs into round holes. Netflix is a content company, Roku, despite its own investment into original content is a platform advertising company. Netflix does not need any help getting onto platforms. It’s on all of them.
Does anybody remember AOL Time Warner? Shoot does anybody remember AOL?
Some companies belong together. The merger between Viacom and CBS made perfect sense. Two companies that make content that can complement the other merged to make an existing streaming service more viable and expand the portfolio of their respective studios. Heck, the two were one company before already.
Another major story was Disney buying out its partners with Hulu. The merger with 20th century Fox and so on give a studio more studios, It gave it more intellectual property, it gave Disney more control of Hulu which it had been developing for years. Similarly, if Disney were to purchase a company that owned theme parks like say, “Sea World” it could be an expansion of its brand or a way to get more of a foothold in Florida. But it would probably not want to buy McDonalds, because they don’t do the same thing.
So right now I am going to lump Netflix buying Roku alongside of the Cheap Apple TV rumor, the “Apple is making a TV rumor, the expectation of a Microsoft cloud player device and others. Expect Netflix to concentrate on steadying the ship, reducing spending, and rolling out its new tiers. If Roku is going to be involved in any major transactions it is much more likely to be the one buying. I would keep an eye on Roku and Starz, or Redbox. You have to seriously consider how a company will work once the deal is done.
Of course, I can totally be wrong. So we will see. But until a reputable source comes forward this is nothing.