Streaming video service Netflix might be trying to acquire connected-TV platform Roku, a company that's built a growing business around its own streaming service people can watch free with advertising, called The Roku Channel, according to rumors that have surfaced in recent weeks. Roku competes with Apple, Amazon, Google, and Samsung in the market for streaming devices, and some of those industry titans are battling with the smaller company for lucrative video-ad dollars.

For now, it's just a rumor, but Netflix has good reason to make a deal like this happen. Video content is becoming commoditized, and Netflix's recent moves suggest it recognizes the need to pivot quickly.

Why the rumour may be true

John-Mark Smith/ Pexels | Netflix obliterated having to leave the comfort of your own PJs in order to rent a movie

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.

Netflix's years of unflagging growth pushed nearly all Hollywood's major media companies to pour billions of dollars into their own streaming operations.  These so-called streaming wars brought about a wave of new services, including Apple TV Plus, Disney Plus, HBO Max, Peacock and Paramount Plus, a trend that's complicated how many services you must use and pay for to watch your favourite shows and movies online. 

With the intensifying competition to hold your attention and your subscription dollars, most Netflix rivals have leaned into a two-tier model, which offers a cheaper membership to watch with advertising as well as a more expensive subscription without ads. Netflix blazed the trail for streaming TV, but its ad-free-only strategy has fallen behind the standards of the industry, as competitors launched giving viewers like you more options. 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.

What’s in it for Netflix?

Roku/ Netflix | Whether it's Netflix, YouTube, Amazon Prime Video, or hundreds of other services, a Roku device lets you watch them all

By acquiring Roku, Netflix wouldn’t have to start building a connected TV advertising business from scratch. As of last quarter, Roku had 61.3 million active accounts, presumably including some who aren’t Netflix subscribers, and it has deep insights into what users are watching and searching for across its entire platform.

By piggybacking on The Roku Channel, Netflix could avoid diluting its premium subscription video (SVOD) service brand while still tapping into an ad-supported revenue stream and exposing Netflix content to a wider audience. It could be a much easier upsell to win, or win back, subscribers by tempting viewers with new seasons and ad-free content after they’ve already become fans.

AP Photo/ Jenny Kane | 5% of Netflix's worldwide revenue comes from North America

Last year, Roku also acquired Nielsen’s Advanced Video Advertising unit, which includes technology for inserting targeted ads into content. It previously acquired ad tech company Dataxu, which helps marketers buy digital video ad campaigns. Buying Roku would give Netflix a shortcut into the ad tech business while also giving it more data and greater reach.