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Roku May Buy Quibi Content. What That Could Mean for Roku’s Stock.

A person about to use the Quibi app on a smartphone

Chris Delmas/AFP via Getty Images

Mobile short-video streaming platform Quibi may have failed, but its content could be coming to Roku.

The Wall Street Journal reported Sunday, citing people familiar with the matter, that Roku (ticker: ROKU) and Quibi are discussing a deal that would bring Quibi’s content to the Roku Channel. The WSJ noted talks could fall through.

A Quibi representative did not return a request from Barron’s seeking comment. A Roku spokesperson said the company does not comment on “rumors or speculation.”

Quibi launched as a bold short-video platform featuring big-time celebrities appearing in original dramas, comedies, and game shows. All episodes on the platform were less than 10 minutes—a premise meant to appeal to commuters and those bored on their phones.

Quibi Founder Jeffrey Katzenberg and CEO Meg Whitman announced the service would shut down in October, pointing to the service’s timing at the start of the Covid-19 pandemic, adding that its premise may not have been “strong enough to justify a stand-alone streaming service.”

Though its library included wacky reality shows and some widely mocked dramas, its “#FreeRayshawn” show won two Emmy Awards. Quibi raised around $1.75 billion from investors. Katzenberg and Whitman said in October the company planned to sell assets, and return capital to shareholders. The Journal reported at the time that Katzenberg said during a call with investors that the company planned to return $350 million in capital.

The Journal reported Roku has been seeking to expand licensed content for the Roku Channel, which is free to users of a Roku device. The outlet noted the company pushed for media from Comcast’s (CMCSA) NBCUniversal and AT&T’s (T) WarnerMedia in negotiations to add the companies’ respective Peacock and HBO Max services to the Roku platform.

Justin Patterson, equity research analyst at KeyBanc Capital Markets, wrote in a Monday note that he expects the content acquisition cost is likely attractive for Roku. He noted that a pursuit of Quibi’s content is, “a logical next step for the business, as it combines exclusive content with distribution.”

“While skeptics will point to Quibi’s struggles, we believe it’s important to focus on the bigger picture—a move toward exclusive content is not likely to be an isolated event,” he added. “If Roku can succeed with exclusives, we believe tailwinds to active account growth, engagement, and advertising revenue could emerge that are not contemplated in models.”

Roku stock was down 3.3% to $321.14 on Monday, while the S&P 500 index was down 2%. Roku shares have risen about 134% in the past 12 months. The company has added millions of users amid a broader rise in at-home entertainment spurred by the pandemic.

Write to Connor Smith at [email protected]

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