Fox Places Big Bet on Streaming with $22 Billion Roku Deal

There’s a new mayor in Roku City.

On Monday, Fox Corp. announced an agreement to acquire streaming platform Roku for $22 billion, uniting two titans in the free ad-supported streaming TV (FAST) space. Not everyone is loving the news, however: Shares of Fox tumbled 15%.

Tubi or Not Tubi

Fox hasn’t been a full-fledged participant in the Streaming Wars, opting against a premium subscription service to rival the likes of Netflix and Hulu, though it does have smaller over-the-top offerings for news and sports (both of which print money as linear cable TV assets). It also has Tubi, the FAST service it acquired for $400 million in 2020; the unit began turning a profit in the second half of last year. 

Roku, while largely known for its connected TV boxes, is a major FAST player in its own right via The Roku Channel. Folding The Roku Channel into the Fox empire would create a media conglomerate capable of competing for eyeballs, and ad dollars, with the best of them:

• Added together, Fox and The Roku Channel accounted for just over 10.2% of all TV viewership in March, according to Nielsen’s The Gauge Index. That would outpace all providers except Disney (10.5%) and YouTube (13.2%), though the soon-to-be-married Paramount and Warner Bros. Discovery would together garner about 14%.
• On the ad side, Roku generated $2.3 billion in revenue last year, up 27%, while Tubi pulled in $1.1 billion, up 19%.

“Just [Tubi and The Roku Channel] alone, that is the second-biggest [connected TV] company by ad revenue in the US, basically second to YouTube,” Moe Chughtai, global vice president of strategy and partnerships at adtech platform MiQ, told The Daily Upside. “It would be a bigger ad business than Netflix, than Prime, than Disney, than Paramount and Warner Bros. Discovery.”

FAST and Furious: Still, a $22 billion acquisition is a big pill to swallow for a company valued at about the same amount. Fox said Monday it plans to pay with cash and new debt, citing a $12 billion loan. “They’ve been talking about setting up the balance sheet for M&A for a couple of quarters now,” Third Bridge sector analyst John Conca told The Daily Upside. “I would have thought something smaller, personally.”

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