One of the main winners of the streaming wars, Hollywood’s years of spending on content for free, has become a non-combatant. While companies like Disney spent a lot of money building streaming services to compete with companies like Netflix, others kept their powder dry. Fox, which still makes most of its money from old-fashioned “linear” television, was one of them. Its share price has increased by 40% over the past five years, during which time Disney’s share price has fallen by the same proportion.
On June 15, Fox made a big move into the streaming business, with the surprise announcement that it has agreed to acquire Roku, (Unsplash)
On June 15, Fox made a big move into the streaming business, with the surprise announcement that it had agreed to acquire Roku, an American firm that sells streaming hardware and software and operates its own streaming channel. The deal, valued at about $22 billion in cash and stock, signals a shift in Fox’s strategy and suggests how the next phase of the streaming wars might be fought.
Fox has been quietly building out its streaming capabilities for some time. In 2020 it acquired Tubi, a free, advertising-supported service (known in jargon as the FAST Channel), for $440m. It has gradually grown this simple entertainment channel into a platform that commands 5% of the streaming viewership in the US, on par with Paramount and NBCUniversal’s Peacock. Last year it launched Fox One, a paid-subscription streaming home for all of Fox’s news, sports and entertainment.
Roku will significantly expand Fox’s streaming operations. Its own FAST service, the Roku Channel, will give Fox a combined 11% share of streaming viewers in the US, overtaking Disney and claiming third place behind YouTube and Netflix. Cable will remain Fox’s bread and butter. But streaming will now be a serious part of its business mix: Tubi and Roku will contribute about 30% of total revenue, estimates MoffettNathanson, a firm of analysts who sees the deal as “a way to ensure that streaming continues to grow.” [Fox’s] “In the future, streaming will overtake traditional distribution in the coming years.”
The deal also shows how advertising is becoming the battlefield of the streaming wars. Subscription streamers like Netflix, which initially avoided ads, are now adopting them because they are unwilling to pay members $20 per month for an ad-free plan. Antenna, a research firm, estimates that more than half of new streaming subscribers in the US sign up for ad-supported plans. As traditional TV viewership declines, advertisers are looking for new places to sell their ads. Fast channels are where a lot of people are hanging out.
The arrival of Roku will improve Fox’s advertising offering. Roku made $2.3 billion last year from selling advertising on the Roku Channel and its TV operating system. Along with scale, Roku will also bring a wealth of data. Its operating system powered 8 million smart TVs sold in the US last year, more than any of its rivals, including Samsung, Alphabet and Amazon. Worldwide, more than 100 million households use Roku’s streaming technology, providing it with information about their viewing habits that will help Fox target advertising across all of its services. After years of offering a comparatively restrained streaming offering, Fox is suddenly looking pretty wild.
