FOX To Acquire Roku – What Could This Mean For Next Day On Hulu?
While Disney acquired 20th Century Fox in 2019, it didn’t acquire everything within FOX, as a new company consisting of FOX Entertainment, FOX Sports and FOX News, continued under Murdock family control.
During the past few years, Disney has had a multi-year licensing deal with FOX to bring next-day episodes of FOX shows like “Best Medicine”, “Masterchef” and “Doc” onto Hulu/Hulu On Disney+ in the United States for a limited time.
While also licensing hit adult-animated shows like “The Simpsons”, “Bob’s Burgers” and “Family Guy” to premiere on the FOX linear channel.
However, all of that is likely to change, not just because FOX’s deal with Hulu ends in 2019, but today, FOX has announced that it has entered into an agreement to acquire Roku for around $22 billion.
The transaction combines FOX’s leading sports, news and entertainment content and the Tubi service, with Roku’s leading connected TV platform, The Roku Channel, first-party data and direct relationship with more than 100 million global streaming households. Together, FOX and Roku will create a scaled next-generation media and technology company positioned at the intersection of two of the most important forces reshaping video consumption: the enduring primacy of live sports and news, and the continued rise of streaming.
FOX and Roku are committed to continuing to operate Roku as an open, partner-friendly platform and to the continued ubiquitous distribution of FOX content. On a pro forma basis, the combined company will become the third-largest player in U.S. television by share of viewing, with an attractive mix of FOX’s sports, news, and entertainment content, alongside streaming services Tubi and The Roku Channel. That distribution and engagement scale spans every major viewing environment – broadcast, cable, local and streaming – creating broad and diversified reach that benefits viewers, partners and advertisers.
Lachlan K. Murdoch, Executive Chair and Chief Executive Officer of Fox Corporation, said in a statement regarding the deal:
“This is a defining moment for FOX, and a natural extension of the deliberate and focused strategy we have been executing for nearly a decade. In 2019, we reoriented the company around live news and sports. In 2020, we acquired Tubi and under our stewardship it has become one of the most successful businesses in streaming. Today, we take the next step: bringing together the most valuable live content portfolio in video consumption with the preeminent streaming platform through which America watches it. This combination will transform the scope of our company into high-growth verticals and yield a step change in our overall growth profile. And we are executing this acquisition from a position of financial strength – maintaining our investment grade balance sheet while providing our shareholders with an uninterrupted return of capital program in the form of share buybacks and dividends. Roku pioneered streaming TV and scaled it into a leading CTV platform. Together, we intend to lead its next chapter.”
Anthony Wood, Founder, Chairman and Chief Executive Officer of Roku, said:
“Over the past two decades, we’ve built Roku into the leading TV streaming platform, reaching more than 100 million households globally and reshaping how people discover and enjoy entertainment. I’m incredibly proud of what our team has built, and the combination with FOX is an extraordinary opportunity to accelerate our vision, scale faster and innovate more aggressively for viewers, partners and advertisers. That’s why our Board of Directors unanimously determined after concluding its strategic review process that this transaction offers a significant premium to Roku shareholders while also providing them with the opportunity to participate in the compelling future upside of the combined company. I couldn’t be more excited about what we’ll accomplish together.”
According to FOX, this deal will allow the companies to take advantage of Roku’s platform, which has leading scale in the attractive, high-growth connected TV vertical, reaching over 100 million global streaming households, including more than half of all U.S. broadband households.
FOX already has a large portfolio of content, including live news and sports such as the NFL, MLB, NASCAR, Big Ten, FIFA World Cup, FOX News and FOX Business, that represents some of the most valuable appointment-viewing content in television. Together, FOX and Roku will encompass premium live content, broad distribution and significant audience reach across linear and streaming.
The acquisition of Roku positions FOX across the full video ecosystem and provides a wider entry into the high-growth segment of connected TV, particularly advertising and streaming subscriptions.
One of the key features listed as one of the advantages of this deal, is that it creates a more powerful streaming platform. Brings together FOX’s premium content and advertising capabilities with Roku’s consumer interface, home screen, platform technology and direct viewer relationships to enhance content discovery, deepen engagement and create a more compelling streaming experience for consumers and content partners.
FOX also wants to use this deal to advance its business mix toward high-growth streaming and connected TV verticals and maintain a balanced mix across advertising and distribution businesses, while strengthening the combined company’s long-term growth and financial profile and maintaining FOX’s disciplined capital allocation approach.
Roger’s Take: FOX picking up Roku wasn’t my first choice, as I figured Comcast might be able to use it better, but FOX is now once again building out its streaming business. It’s no longer happy sitting on the sidelines watching other companies gain more market share, though FOX is going about it differently.
In order to compete with Netflix and Amazon Prime, we are going to see some major consolidation within the streaming industry within the next couple of years, with Hulu merging into Disney+, HBO Max and Discovery+ into Paramount+, and now I wouldn’t be surprised if Tubi, Roku and FOX One all become wrapped up.
When FOX’s next-day contract with Hulu comes to an end in 2029, I’ll be surprised if it is renewed, from both sides. FOX might be happy taking the licensing money from Disney, but by then, will they want access to their own shows to boost up Roku/Tubi usage instead? Will Hulu need access to FOX’s next-day content with the combined Hulu and Disney+? Would it not be better for Disney to invest that licensing money into its own content? And will FOX still be happy to pay Disney to create adult animated shows like “Family Guy”?
There are a lot of questions, but no real answers. We probably aren’t going to find out how this is all going to play out for a few more years, unless the existing contract is cut short if one of the parties is willing to buy that contract out to escape it early. We’ve seen this happen in the past, but either way, don’t expect anything to change in the short term. But FOX is about to supercharge its streaming business and is doing so in a unique way.
What do you think of FOX purchasing Roku? Let me know on social media!
