UPDATED with stock uptick. In its biggest original programming foray to date, Roku has bought exclusive global distribution rights to the portfolio of Quibi, the recently shuttered mobile-only streaming venture fronted by Jeffrey Katzenberg.
The acquisition covers most of the Quibi library, but some daily news shows are not part of the package. A key draw for Roku is the talent, a roster including Idris Elba, Kevin Hart, Liam Hemsworth, Anna Kendrick, Nicole Richie, Chrissy Teigen and Lena Waithe. The lineup includes titles like Most Dangerous Game, Dummy and Murder House Flip.
Financial terms were not disclosed, though the valuation is understood to be less than $100 million, according to insiders. Roku shares rose 5% to $398.60 on the news. At one point early in the trading day, they reached $402.81, an all-time high.
In an interview with Deadline, Roku VP of Programming Rob Holmes told Deadline that the unusual rights flexibility offered by Quibi will stay in place, with rights reverting after seven years. “We preserved all of what was in the existing agreements,” Holmes said. “We’re excited about that. It’s great, high-quality, top talent and high-quality content.”
The programming will be available for free starting later this year. Shows will have advertising, as they did on the $5-a-month Quibi service, and they will be housed on the Roku Channel. The hub for free and premium streaming channels, including 150-plus free live, linear offerings, has become a mainstay of the company’s strategy since Roku launched it in 2017. By the fourth quarter of 2020, it was being viewed by households representing an estimated 61.8 million people, the company said, double its reach at the end of 2019.
The deal puts a final punctuation mark on the Quibi experiment. Founded by Katzenberg and Meg Whitman with a remarkable $1.75 billion in startup capital, the mobile-focused streaming service had a noisy debut last April but never gained traction. Six months in, execs announced it would shut down by the end of the year. The coronavirus pandemic clearly worked against the on-the-go premise of Quibi, whose name is short for “quick bites,” but its shows also drew decidedly mixed reviews. There were some exceptions, though — #FreeRayshawn, for example, netted two Emmys.
“The most creative and imaginative minds in Hollywood created groundbreaking content for Quibi that exceeded our expectations,” said Quibi Founder Jeffrey Katzenberg. “We are thrilled that these stories, from the surreal to the sublime, have found a new home on The Roku Channel.”
Financial terms of the deal, whose negotiations surfaced last weekend, were not disclosed. In the transaction, Roku acquired Quibi Holdings, LLC, the company that holds all of Quibi’s content distribution rights. Quibi’s infrastructure and technology, such as its Turnstyle interface, are not part of the deal.
The user experience on Roku Channel, Holmes conceded, will be different from the Quibi experience. Unlike shorter bursts on a mobile phone, Roku will look for longer engagement in the living room.
“It’s the same availability of content, the same presentation of content,” Holmes said. “But as we spent a bunch of time with it, it really works, but they’re just TV episodes. I think their premise was, you have 10 minutes, you would watch it. Our view is, this is TV, someone’s going to spend half an hour or an hour or two hours watching it because it’s just that compelling.” He added, “You don’t usually see content like this for free in streaming.”
Holmes said more content acquisitions akin to the Quibi purchase are likely down the road as Roku continues to grow, though he declined to say what kinds of programming the company would pursue. Roku overall has been a spectacular growth story, rising from a maker of hardware boxes and dongles enabling viewers to stream to a tech heavyweight worth nearly $50 billion.
In the official deal announcement, Holmes described it as “a rare opportunity.” On the Roku Channel, he added, “We are consistently expanding the breadth and quality of our free, ad-supported content for our users.”
Reaching a young audience is another key driver of the deal. Quibi’s ambition was to attract a large audience of viewers aged 18 to 35, and many of those viewers can be found on Roku. Smart TV adoption is also a tailwind for the company. In addition to the Quibi news, Roku said Friday it is the No. 1 smart TV operating system in the U.S. and Canada. Citing data from NPD Group, it said it has 38% market share in the US and 31% in Canada, based on figures from January 5 to December 26 of 2020.
“Quibi championed some of the most original ideas and inventive storytelling, and I’m so proud of what I was able to create for the platform,” said Veena Sud, creator, writer, director and executive producer of The Stranger. “I’m so excited to now be able to share this thriller with millions of streamers on The Roku Channel.”
LionTree served as the sole advisor to Quibi on the transaction.