Fox Corp. announced on Monday it would acquire streaming platform Roku for $22 billion, bringing a second free, ad-supported streaming service and streaming technology into its portfolio alongside linear TV networks and Tubi. The acquisition represents what analysts called a strategic pivot for the legacy media company, positioning Fox to compete more directly in the streaming ecosystem. Fox shareholders reacted negatively to the news, with the stock falling 16% on Monday to a 52-week low and declining another 4% on Tuesday. The deal comes as the media industry has been preparing for consolidation and mega deals, though this particular acquisition surprised the market. Analysts view the combination as strategically complementary, pairing Fox's sports and news content with Roku's leading distribution platform and first-party data capabilities.
Fox Stock Falls 16% Following Roku Acquisition Announcement
Fox shares traded down 16% on Monday after the company announced the Roku acquisition, hitting a 52-week low. The stock fell an additional 4% on Tuesday. Some industry analysts and insiders attributed the sharp stock reaction to the new debt Fox would be taking on as part of the deal, though the company's leverage will be relatively low after the deal's expected close in the first half of next year.
Mike Proulx, Forrester's vice president and research director, told CNBC in an email that it was too early to take this as a negative market reaction and noted that big media deals "often get punished in the short term because they introduce uncertainty." Proulx added: "In this case investors are likely questioning the near-term cost-benefit. But what the market is missing is the long-term strategic importance of this deal. It's a must for Fox."
Analysts Call Deal Strategic Fit for Content and Distribution
Piper Sandler analyst Thomas Champion wrote in a note on Monday: "We view this as a strategic fit. Fox marries its strong content with Roku's leading distribution platform and first party data that add scale and can enhance the value proposition with advertisers." Champion highlighted Fox's long list of sports rights and Roku's position as the leading streaming platform—offered on both dedicated devices and smart TVs—as "highly complementary."
"The combined company will be the third largest player in the U.S. by share of viewing, spanning broadcast, cable, local and streaming," Champion said.
MoffettNathanson called the deal "an unexpected strategic pivot" in a Monday note. LightShed Partners called it a "bold move," stating: "Legacy media has long suffered from the innovator's dilemma, with most players allergic to risk. Fox has repeatedly talked about using its financial strength to make acquisitions and was routinely criticized for being underlevered, but Roku is a far larger acquisition than any Fox investor expected."
Fox Remained on Streaming Sidelines Until Roku Deal
While Fox's peers have been in the thick of the streaming wars—working to hit profitability for fledgling services and exploring deals to bulk up content portfolios—Fox has largely stayed on the sidelines. The company offloaded its entertainment assets to Disney in a 2019 blockbuster deal that left Fox with live sports and news TV networks.
Fox acquired Tubi in 2020 for less than $1 billion. Since then the free, ad-supported service has been its biggest streaming priority. Tubi touts the largest library of licensed content and has been building out originals with content creators from social media platforms. Last year the company launched Fox One, a direct-to-consumer option that offers all of Fox's content, including sports and news.
Fox is perhaps best known for its Fox News Channel, one of the highest-rated networks in the cable TV bundle. Live sports like NFL games and the FIFA World Cup drive viewership and advertising revenue for Fox.
Roku Platform Gives Fox Streaming Ecosystem Leverage
The Roku acquisition brings Fox the top hardware maker in streaming plus another free, ad-supported streamer with The Roku Channel. MoffettNathanson noted that the acquisition puts Fox in the "upper end of streaming viewership," with Tubi and Roku combined. The combined viewership share edges out Disney's Disney+, Hulu and ESPN, per MoffettNathanson's estimates.
Roku negotiates with media companies to make their apps available on its platform. It also has considerable control over how content and media players are surfaced on its home screen. Other streamers—from Disney+ to HBO Max—share a portion of their ad revenue with Roku when content is viewed on the platform.
For Roku, the deal means a partnership with some of the highest-rated sports and news content in the industry, and a likely boost to engagement. It also puts together two advertising platforms at a time when media companies have leaned heavily into the area as a revenue driver.
Roku shares hit a 52-week high on Friday after initial reports of a potential sale. Its stock was up about 50% for the year through last week, even prior to the deal reports.
MoffettNathanson called out two specific weak points for Roku—one being industry consolidation, and the second being Walmart's 2024 acquisition of smart TV maker Vizio. Walmart, the top seller of smart TVs like those powered by Roku, has been slower than some expected to expand its market share via Vizio.
FAQ
What did Fox Corp. announce on Monday regarding Roku?
Fox Corp. announced on Monday it would acquire streaming platform Roku for $22 billion. The deal brings Roku's streaming technology platform and The Roku Channel into Fox's portfolio alongside its linear TV networks and Tubi streaming service.
How did Fox stock react to the Roku acquisition announcement?
Fox shares fell 16% on Monday following the acquisition announcement, hitting a 52-week low. The stock declined an additional 4% on Tuesday. Some analysts attributed the negative reaction to concerns about new debt from the deal and near-term cost-benefit questions.
When is the Fox-Roku deal expected to close?
The deal is expected to close in the first half of next year, according to the announcement. Fox's leverage will be relatively low after the deal closes, despite the company taking on new debt as part of the $22 billion acquisition.
