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Walmart Buying Vizio Isn’t The Roku Death Blow Some Are Suggesting

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Following the confirmation that Walmart is buying Vizio, there has been quite a bit of speculation about what this means for Roku, with some even predicting this to be a major issue. While it is an issue, it is unlikely to be the death blow that some seem to be suggesting.

  • Does Roku now have a new and important competitor to deal with? Yes.
  • Did Roku shares slump on the news of the acquisition? Yes.
  • Is Roku dealing with a weaker ad market than usual? Yes.

All of these issues are very normal issues under the circumstances and ones which individually (and even collectively) are unlikely to impact Roku significantly over the long term.

To explain, let’s address each one individually.

Roku has a new and important competitor

Roku is one of the leading players in the streaming market and at both the hardware and software levels. In fact, while most will think of Roku first as a hardware-maker, the company makes significantly more money from its platform. If anything, Walmart is likely to have viewed the Roku blueprint as a reason to buy Vizio.

In spite of suddenly becoming more of an important player, the problem Walmart faces is that it has some major work to do to catch up with Roku. This isn’t the same as a situation where Walmart has purchased a major competitor to Roku. By all accounts, Vizio is a competitor, but a much smaller one.

To put the difference into perspective, while Vizio has 18 million active accounts, Roku has 80 million active accounts. With more than 4x the number of accounts, these two are operating at very different levels, and that’s unlikely to change anytime soon.

Adding to this, Vizio and Roku are effectively ‘walled gardens’ from the user perspective. While this makes it easier (and harder at the same time) to retain users, what’s even harder is getting users to switch from one walled garden to another. Those that are already using Roku are likely to continue using Roku. Following the sale of Vizio to Walmart, can the same be said for existing Vizio users? Or will they now see this as the right time to jump ship?

Where Walmart could prove a problem is on the retail side of things. Walmart sells both Vizio and Roku products, and following the purchase, it makes sense that Walmart might now want to prioritize its own Vizio products in the future. Does that mean it will stop selling Roku? Probably not. More to the point, Walmart isn’t the only place you can buy Roku products.

Amazon is a great example here, as Amazon’s Fire TV line and operating system is certainly more of a horizontal competitor to Roku. In spite of this, Amazon continues to sell Roku products. Does it prioritize its own products? Yes, but that’s not the same as avoiding selling some of the most popular streaming products around.

Roku shares slumped following acquisition

Following confirmation of Walmart buying Vizio, Roku shares slumped. In fact, they actually started to slump days before the confirmation, and soon after talks between Walmart and Vizio were first reported. It is just that they slumped further upon confirmation of the acquisition.

In reality, this is a fairly normal reaction to what’s happening. No matter the market, when a major announcement is made, and especially an acquisition, the market is impacted to some degree. So the fact that Roku has been affected is to be expected. Whether it remains affected is far less clear and not something that anyone is going to be able to predict with any certainty so soon after the news.

The other issue here is that it wasn’t just the acquisition that has affected the price of Roku in recent days. The company also released its latest earnings report last week, confirming that it is still dealing with the impact of a weaker ad market.

Roku is dealing with a weaker ad market

Roku is certainly dealing with a weaker ad market right now, and that’s a problem. Similar to why Walmart wants to buy Vizio, ads are big business for Roku. However, it is not as though Roku is the only one dealing with a weaker ad market. The whole industry is, and that’s the very same industry Walmart is now attempting to increase its presence within.

Right now it is very difficult to predict what happens with the ad market. The whole industry has been facing challenges for some time now and this is something many companies, including websites, are attempting to navigate. In this sense, Roku is no different to Walmart, or Amazon, or any of the other companies operating within this space, as a weak market affects all those involved, not just Roku.

Walmart is playing catchup, not competing

When taking all of these points into consideration, it becomes clearer that Walmart is not the threat to Roku that some appear to be predicting. At least not yet. Vizio is a significantly smaller player than Roku and while Walmart has improved and increased its presence with the purchase, it is still playing catch-up to the likes of Roku.

This is all while having to now deal with the very same issues (including user retention and weaker ad market) that Roku is currently dealing with. If Walmart manages to prove better at dealing with those issues then, maybe, over time, Walmart may prove a bigger threat to Roku.

Today, however, Walmart’s purchase of Vizio is likely to be more of a ‘let’s keep an eye on this’ situation for Roku rather than a ‘red alert’ moment.

Roku has other problems to worry about

In the meantime, Roku has much bigger problems to worry about. Advertising and subscriptions are both important to the company’s bottom line and both of these areas are seeing big changes.

On the advertising front, almost every major streaming service (including Netflix and Amazon Prime Video) are now moving into the advertising space. This drives competition up and potentially makes it harder for other companies, including Roku, to continue to enjoy the same rates and agreements as before. This is especially when factoring in the current situation where advertisers already appear reluctant to spend big on advertising.

On the subscription front, this is also an area where big changes are happening. While it used to be very easy to get subscribers to sign up to new services, those times are changing. Whether it is simply a matter of subscription fatigue, or even more simply, the need to cut down on spending, more homes are finding it more difficult to justify paying for the same number of subscriptions.

This is also at a time when consolidation is becoming more of a thing. While the Disney-Fox-Warner Bros. Discovery sports streaming service is the most obvious example, the last year has seen plenty of other partnerships and bundles becoming available.

So, with both advertisers and consumers more reluctant to spend right now, mixed with the possibility of fewer subscriptions to make a commission on (due to consolidation), Roku probably has more important things to worry about than Walmart’s purchase of Vizio.

John Finn

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