One of the main winners of the streaming wars, Hollywood’s years-long content-spending free-for-all, has turned out to be a non-combatant. While companies such as Disney blew gazillions on building streaming services to compete with the likes of Netflix, others kept their powder dry. Fox, which still makes most of its money from old-fashioned “linear” television, was one. It has been rewarded with a 40% rise in its share price over the past five years, during which time Disney’s has fallen by the same proportion.
On June 15th Fox took a big step into the streaming business, with the surprise announcement that it had agreed to acquire Roku, (Unsplash)
On June 15th Fox took a big step into the streaming business, with the surprise announcement that it had agreed to acquire Roku, an American firm which sells streaming hardware and software and operates a streaming channel of its own. The deal, valued at around $22bn in cash and stock, signals a shift in strategy at Fox and suggests how the next phase of the streaming wars may be fought.
Fox has been quietly building up its streaming capabilities for a while. In 2020 it acquired Tubi, a free, ad-supported service (known in the jargon as a FAST channel), for $440m. It has slowly grown the unremarkable entertainment channel into a platform accounting for 5% of streaming viewership in America, on a par with the likes of Paramount and NBCUniversal’s Peacock. Last year it launched Fox One, a paid-subscription streaming home for all of Fox’s news, sport and entertainment.
Roku will expand Fox’s streaming operation significantly. Its own FAST service, the Roku Channel, will give Fox a combined share of 11% of streaming viewership in America, overtaking Disney to claim third place behind YouTube and Netflix. Cable will remain Fox’s bread and butter. But streaming will now be a serious chunk of its business mix: Tubi and Roku will contribute about 30% of total revenue, estimates MoffettNathanson, a firm of analysts, which sees the deal as “a way to ensure [Fox’s] future as streaming overtakes traditional distribution in the years ahead”.
The deal also demonstrates how advertising is becoming a battleground of the streaming wars. Subscription streamers such as Netflix, which initially shunned ads, have come to embrace them as they court members unwilling to shell out $20 a month for an ad-free plan. More than half of new streaming subscribers in America sign up for ad-supported plans, estimates Antenna, a research firm. Advertisers, for their part, are on the hunt for new places to sell their commercials, as viewership of traditional TV declines. FAST channels are where many are turning.
Having Roku will improve Fox’s ad offering. Roku made $2.3bn selling ads last year on the Roku Channel and within its TV operating system. As well as scale, Roku will bring a trove of data. Its operating system powered 8m smart TVs sold in America last year, more than any of its rivals, which include Samsung, Alphabet and Amazon. Worldwide, more than 100m households use Roku’s streaming tech, providing it with information on their viewing habits which will help Fox to target ads across all its services. After several years with a streaming offering that was comparatively tame, Fox is suddenly looking rather ferocious.
