Roku manufactures devices that let you watch your favorite streaming services, such as Netflix and HBO, straight from your couch. It also operates The Roku Channel, which offers Live TV and content. This experience is free, supported by ads, or accessed through a premium subscription account.With so many good things going for Roku, it would make sense that a big company like Netflix is looking to buy it, or at least that's what rumors say. But why would Netflix even consider buying Roku?

Is Netflix Really Considering Buying Roku?

According to a report by Business Insider, Netflix might be looking to buy Roku. The report says that Roku has blocked its own employees from selling their stock, making Roku's employees speculate that Netflix is about to swoop in and acquire Roku.

If Netflix were to buy Roku, such an announcement would shock the streaming market. However, it is important to note that neither Roku nor Netflix have confirmed any deal at the time of writing.

Why Would Netflix Want to Buy Roku?

computer screen with netflix interface

Netflix has been having a very tough time in the recent past. Netflix's subscriber growth slowed down at the beginning of 2021. And the streaming giant actually lost 200,000 subscribers in the first three months of 2022, marking the first time this has happened in over a decade.

In addition, according to a CNBC report, Netflix has lost more than 68% of its value in 2022 due to subscriber losses, increased competition, and a slowdown in content production.

Simply put, Netflix is bleeding money, and content. Plus, it needs to increase its subscriber count and find new revenue sources. And that's where Roku comes in.

As reported by AdExchanger, Roku has a thriving advertising business. The Roku Channel, for example, provides free, ad-supported access to more than 100,000 movies and TV shows and more than 100 channels. It is a significant advertising revenue generator for Roku.

Netflix needs to offer an ad-supported tier to the plans it offers, and The Roku Channel would help with this, in addition to adding over 60 million subscribers to the Netflix empire, not to mention its growing library of titles.

Roku also has a problem that offers an opportunity for Netflix. Nasdaq reports that Roku's stock has fallen by more than 75% during the first quarter of 2022, meaning this would be a great time for Netflix to buy Roku for a lower price.

What Happens if Netflix Buys Roku?

At first glance, the deal seems to make sense for both companies.

According to Business Insider, Roku has relied heavily on awarding equity grants to its employees to hold on to its talent. Unfortunately, the value of these grants has fallen drastically as Roku's stock has fallen. Roku's employees would benefit from a Netflix acquisition, which would undoubtedly help restore a good chunk of the value of these grants.

Netflix, on the other hand, needs a new revenue source badly, and Roku's advertising business is exactly what the doctor ordered.

In addition, both companies have a history together. Roku actually started out as part of Netflix more than ten years ago. This shared historical memory suggests both companies have some level of cultural alignment, or could easily create it, which would make it a relatively smooth merger.​​​​​​​

Is Buying Roku a Good Idea?

man holds his chin on his hand in thought

Although Roku invests in content creation itself, its core business is to host all streaming companies on its platform in a neutral way, thereby earning significant advertising revenue from all audiences.

Should Netflix acquire Roku, then perhaps Netflix would prioritize itself over other amazing TV streaming services like Apple TV or Hulu, or Amazon on the Roku streaming hub. This would chase away the other streamers from the hub and eventually kill Roku altogether.

Besides, Netflix runs on many other devices and operating systems. Why prioritize Roku? And does Netflix really want to become a hardware and software company? Only time will tell.

Netflix Should Focus on Content

Netflix owes its dominance to great content. Whether Netflix buys Roku or not, its continued success will depend on providing its subscribers with irresistible and diverse entertainment.

Although Netflix remains one of the best streaming services, for now, it is surely aware that its streaming competitors have grown into formidable entertainment alternatives, and they are just a few clicks away.