Will Fox’s Roku Buy Help Lachlan Murdoch Leapfrog Rivals in Streaming Wars?

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By Brian Steinberg

Brian Steinberg

Senior TV Editor

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Lachlan Murdoch has for years minimized the allure of streaming for a company such as his Fox Corp., which continues to be a major provider of sports, news and entertainment through the traditional content channels of broadcast and cable television.

Fox previously mocked competitors who charged consumers extra for streaming favorites, emphasizing that its Tubi service remained free. It also aimed to forge a closer bond with advertisers by highlighting its preference for supporting content with commercials instead of eliminating ads from the viewing experience. When the company introduced Fox One, its new subscription streaming platform targeting cord cutters, Murdoch prohibited the company from advertising the outlet to traditional TV audiences, an effort to prevent the new platform from disrupting its ties with cable and video distributors.

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Murdoch may have previously offered only a tentative gesture toward streaming, but he is now embracing the medium wholeheartedly.

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Fox will pay $22 billion in cash and stock to purchase Roku in a transaction that will reshape the company, which has been a smaller player in media since selling its studio assets and much of its cable portfolio to Disney in 2019. The agreement, Murdoch stated Monday during a call with investors, "creates a company better positioned for the next decade of video than either of us would be alone."

Fox is betting that its partnership with Roku, which has flourished since its founding in 2002 by linking audiences to streaming content through its signature devices and home screen, will help it achieve greater success in a world increasingly shifting toward streaming, regardless of Murdoch's earlier hesitation. The new combination will give Fox "a strategic TV operating system while likely being able to get more leverage on the advertising business," according to research firm William Blair in a note to investors Monday.

Indeed, advertisers are shifting funds away from traditional cable networks in the industry's annual "upfront" market, where major U.S. media companies aim to sell most of their commercial inventory ahead of their next programming cycle, and investing it in streaming video.

"At a high level, the company would become an even bigger player in the US (and by extension, global) advertising industry, with $9 billion of pro forma advertising revenue, or around 14% of all spending on US television," according to a research note from Madison & Wall, a consultancy, issued Monday. "In streaming, the transaction would combine Fox's Tubi service with the Roku Channel and, by our estimates, create a platform that would represent roughly 16% of US streaming advertising revenue."

Acquiring Roku, however, will place Fox in an even stronger position relative to competitors. Fox has been "the only major broadcast network without a scaled streaming anchor to match Disney+, Peacock, or Paramount+," said Mike Proulx, vice president and research director at Forrester. "Roku brings scale, data, and its operating system and Fox brings premium live sports and news, creating a closed-loop connected TV advertising engine."

Fox becomes both a distributor and a content provider. Companies such as Amazon and Paramount will need to negotiate deals with Fox every few years to maintain their content on Roku. When asked if Fox is prepared to negotiate from a different perspective, Murdoch reminded analysts Monday that "this is not our first rodeo" regarding distribution. Fox previously operated the Sky satellite service before selling it to Comcast in 2018.

Roku could even provide Fox with additional leverage as it negotiates with sports leagues for top rights to games from the NFL and Major League Baseball. These leagues are keen to get their matches to viewers through new media outlets, and Roku could potentially expand the reach and audience for Fox's World Series broadcasts and Sunday afternoon football games. The NFL is already interested in exploring the possibility of using a clause in current agreements with Fox, NBC, CBS and Amazon to renegotiate contracts in place until at least 2029.

During Monday's call, Murdoch stated that sports rights were not part of the motivation to acquire Roku, and he did not foresee the deal causing any changes to the distribution of sports across broadcast, cable and Fox One.

Could the deal push Fox to reassess its increasingly complex streaming portfolio? Fox already operates Tubi, the free, ad-supported service; Fox Nation, a subscription service targeting fans of Fox News Channel; and Fox One, the new subscription outlet that has gained popularity with both NFL enthusiasts and news followers. Does having Roku under the corporate umbrella eliminate the need to run other standalone outlets?

Murdoch noted that Tubi and Roku have only about a one-third overlap in audiences. "They are not identical services," he said, with Tubi attracting much of its audience on platforms other than Roku.

Whatever the implications of the deal for the company's internal operations, Murdoch clearly hopes that buying Roku will make Fox a more significant force in the media sector. The deal, he stated, "will help define the future of television."

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