Rumor: Netflix could be in talks to buy Roku

Following a rough period for both companies, a new report suggests Netflix may be in talks to buy Roku.

Netflix and Roku are both competing with rivals large and small in the streaming TV market. After years of adding customers every quarter, Netflix recently suffered a significant subscriber loss. Meanwhile, Roku has experienced a major drop in its stock, leaving it vulnerable and struggling to compete with larger rivals. According to Business Insider, this combination of circumstances may lead to Netflix acquiring Roku.

According to the report, the speculation has led to a major uptick in chatter within Roku about the possibility of a takeover. The talk may have been a factor in Roku reportedly closing the trading window for employees to sell their stock. The company is already underwater on its stock compensation, as it has had to rely heavily on that option to keep employees happy since it can no longer offer competitive base pay.

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For its part, the deal makes sense for Netflix as the company looks to grow and diversify its revenue sources rather than rely exclusively on subscriber growth. Roku’s ad platform, in particular, is an appealing incentive for Netflix to pursue the deal.

“It makes sense with where Netflix wants to go,” a technology investment banker told Insider. “And it makes sense in this current environment. Everyone is looking around thinking, ‘I was worth twice as much last year. What happened?’”

Even within Roku, there appears to be support for a potential deal, with one senior-level executive saying the two companies “align well in terms of culture, business, and current valuation.”

Ultimately, a deal may be the best option for both companies to stay relevant in an increasingly competitive industry. However, a deal like this would change the landscape significantly, and it’s not assured if it would be better or worse afterward.