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As Netflix (NFLX 2.90%) prepares to launch its advertising-supported level, rumors have circulated that an acquisition could be in the company’s future to make the transition easier. One company that analysts have repeatedly cited as an option is Roku hardware and streaming service (ROKU 2.15%). That’s why Netflix benefits a lot from joining forces with Roku.

Experience with advertising

At the Cannes Lions advertising festival on June 23, Netflix co-CEO Ted Sarandos confirmed that the company will soon launch an advertising-supported tier. On the same subject : Nickelodeon fans are excited Kenan and Kel are on Netflix, but there’s still one problem. Sarandos explained, “We’ve left a large segment of customers off the table, which is people who say, ‘Hey, Netflix is ​​too expensive for me, and I don’t care about advertising.’

After losing 200,000 subscribers in the first quarter of 2022, Netflix is ​​looking for new ways to attract members. An advertising-supported level is a potentially lucrative way to do it, and few companies have the relative experience that Roku does. Initially launched in 2008 as a collaboration with Netflix, Roku offers a variety of TV devices, software, and The Roku Channel – the company’s streaming service.

The Roku Channel offers a library of more than 100,000 movies and TV shows, as well as more than 100 channels, all free and supported by advertising. From 2020 to 2021, Roku’s platform revenue, which accounts for 82% of the company’s total revenue and includes digital advertising sales from the Roku Channel, has increased by $ 1 billion – an increase of $ 1 billion. 80%.

After years of rejecting the idea of ​​ads, Netflix lacks the infrastructure or experience it now needs. However, Roku’s success with advertising and the fact that the companies were once closely aligned could make for a fruitful meeting.

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A move into hardware

Long before the introduction of the Roku Channel, Roku’s main business was hardware. Roku has developed its first device in partnership with Netflix, with the goal of creating a machine that allows consumers to stream Netflix content. See the article : Top 5 movies and shows on Premier Video this weekend: Fairfax and Emergency. While this project has never been fully realized, Roku has gone on to have significant success with its products. In September 2021, the company announced its tenth generation of devices, including two Roku Streaming Sticks and the Roku Ultra LT, a powerful 4K streaming player.

Knowledge of Roku hardware could help Netflix expand its gaming adventure. Netflix has announced that it will be adding games to its subscription in November 2021 and so far it is mainly focused on mobile games. However, a move in hardware will allow Netflix to develop a device that adapts perfectly to its games and gives them the opportunity to create more powerful titles.

By comparison, Apple has steadily expanded its gaming division, adding Apple Arcade to its subscription service in September 2019. While the Arcade library has many mobile games, many are also playable on Apple’s streaming TV device. the company. From 2020 to 2021, Apple’s streaming sector, including Apple TV, saw a 25% increase in sales while the company’s services sector, which includes Apple Arcade, grew by 27 percent. %.

Netflix desperately needs an additional revenue stream, and it clearly knows this with its recent commercials in games and games. While Roku has no gaming experience, it has the hardware capabilities to help Netflix’s journey into the competitive market. Roku’s high-end Ultra streaming machine is a competitive device against the Apple TV, offering similar specifications for less money. If Netflix can use Roku’s place in the market, the company might be able to turn things around.

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Will the acquisition happen?

Netflix released a statement in early June saying: “We are still in the early stages of deciding how to launch a lower price option, supported by advertising, and no decision has been made. So this is just speculation on this. See the article : Favorite Medical Drama Series Leaves Netflix. point “. The comment came after persistent rumors that, in addition to Roku, the company had met with Alphabet’s Google, NBCUniversal, and Comcast to discuss its future in advertising.

Netflix is ​​expected to present its advertising-supported level for the fourth quarter of 2022, so investors don’t have to wait to know the company’s next moves. In addition, rumors that Netflix would acquire Roku began in early June when employees were unable to sell their stocks due to a blockchain, raising the company’s share price. While it remains in the air in which direction Netflix will go with advertising, significant fluctuations in Roku’s stock could mean something interesting is happening internally.

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