Netflix's bid to acquire Roku could herald the arrival of ads on its platform

Mike Wheatley

Netflix is reportedly looking to acquire Roku, one of the biggest makers of video streaming devices in the world and the creator of the Roku OS TV software.


Rumours of the negotiations were first reported by Business Insider, which notes a lot of circumstantial evidence that supports the story. Notably, Roku has endured a tough year that has seen its stock price fall by more than 80% since July 2021. At the same time, it was recently reported that Roku has shut down a stock trading window for employees. Normally, Roku’s staff are free to sell their stock at any time, but the company has currently suspended this right.

Companies generally only prevent employees from trading their stock ahead of big announcements that could have a major impact on their share price. They do this to prevent insider trading.

The big question is why would Netflix want to buy Roku? The most obvious answer is that Netflix might be interested in developing its own, branded streaming sticks. Roku does, after all, make some of the best streaming devices available, including 4K offerings like the Roku Streaming Stick 4K. Roku’s operating system is also widely used by TV makers such as TCL and Hisense, and so buying the company would even open up the tantalising possibility of a Netflix-branded TV, similar to Sky’s Sky Glass TVs perhaps.

That said, it remains to be seen how Netflix could benefit from having its own hardware. If it does go down that route, it would then have to give consumers a good reason to buy its own TVs or streaming sticks. The obvious thing to do would be to give users some kind of exclusive access to its content. However, such a move may upset Netflix’s other subscribers at a time when many have been quitting the service. Most Netflix viewers would probably be upset at being forced to buy a specific device to watch their favourite series, for example.

As such it may well be that Netflix is more interested in Roku’s advertising platform. Netflix has already made it clear it’s looking into ads and the possibility of a cheaper subscription tier for viewers willing to tolerate them. Business Insider’s report claims that Roku generates seven-times more revenue from ads as it does from hardware sales, so it’s clearly a very compelling platform.

Roku has unique expertise in how to deliver ads in video streaming content, and with its stock lower than it has been for years, it could represent an excellent opportunity for Netflix, which could buy a proven advertising platform rather than try to develop its own.

For now, of course, neither Netflix nor Roku has made any comment on the report, and it’s doubtful either will do so until such a time as a deal is officially announced.