# $FOX dropped 25% buying $ROKU. Is the market wrong? | Accrued Interest Yet Another Value Podcast · 2026-06-28 · 61 min · https://www.youtube.com/watch?v=Q090pufwMck ## Transcript Andrew Walker I’m your host, Andrew Walker. With me today, I’m happy to have on for the 2nd time Simeon McMillan from Accrued Interest. Simeon, how’s it going? Simeon McMillan Great, Andrew. Thanks for having me back. Glad to be a friend of the show, so I’ll pick up the phone anytime you call. Andrew Walker I like that. Look, I’ve really been looking forward to having you on. We said after the first one, because we got rave reviews, that we were going to have you on quarterly. We’re coming up on the end of the quarter, and we have big news, so I’m excited to talk about all that. Before we get there, a disclaimer: Nothing on the show is investing advice. As always, see the full disclaimer at the end of the podcast or in the show notes. Simeon writes Accrued Interest, and he’s been all over everything in media and TMT. But he’s also been all over the big news in the media world over the past couple of weeks, which is Fox buying Roku. If I remember the timeline right, on Thursday or Friday, we got an article that said Roku was for sale, and then on Monday, Fox announced a big deal. I’ll pause there. I think you’re bullish on Fox-Roku. You’ve done 2 pieces already, but I’ll just pause there and turn it over to you. How are you thinking about the Fox-Roku deal? Simeon McMillan Sure, Andrew. I think it’s a great place to start. For your readers, listeners, and subscribers who might not have listened to me on my first visit, I’m the author, host, and portfolio manager of Accrued Interest. I have a Substack that has about 1,400 subscribers. It’s funny and interesting what deals leak and which ones don’t, but I think the way the Roku news came out felt like that. Now, for your listeners, this is a little bit of background. A big thing I do in Accrued Interest is take a step back and look at recent history, not just the last quarter or 2. Roku has been fantasized as a takeover target, an acquisition candidate, for years. For years, okay? There have been many deals that never happened that people thought could make sense. The big thing that changed was that Roku’s controlling shareholder is its founder and CEO, Anthony Wood. So, a deal wasn’t going to happen until he got involved. As you mentioned, last week—or, yeah, a little over a week ago—it was announced that they were exploring a sale. Fox was announced as the winner. It does not look like any new bidders are coming, but it’s June 23rd as we record this, so things could change. I did 2 pieces. The first was a deep dive where I said, “Here’s why this deal makes sense.” I saw some knee-jerk reactions, candidly, that this doesn’t make sense for Fox: “What are they doing? What’s Roku’s strategy here?” I wanted to point out all the different levers within Roku to improve monetization that were just beginning to happen. At a high level, to just level-set, in my last piece—and I honestly wish I’d come up with this metaphor for my first piece—all you need to know is that I basically argued that Roku is a little bit like the Strait of Hormuz for streaming in the United States. The analogy was that the Strait of Hormuz, which has captivated the world in geopolitics, controls about 20% of the world’s oil supply. Well, Roku, which is primarily a US and North American player—but the US is the market that media tends to follow—controls about 44% of streaming television viewing through big-screen television sets. Streaming television viewing through big-screen television sets begins through a Roku. To put that in context, which I go into in the piece—you won’t find this in the financials—that’s about 3 times higher than the next-biggest competitor, which I believe is Amazon. So, I’m going to get to the valuation and the metrics, but I want people to step away from the spreadsheet and just bask in what we have here. You have Fox, which I’ve argued for a while on Accrued Interest has the smartest corporate management team when it comes to doing large-scale M&A. The biggest evidence point I have for that was that they won the streaming race basically by not really playing. It’s a little bit similar to how Sony did. For all your viewers and listeners, back in 2019, Fox closed on the transformational sale of effectively almost all of its cable and media entertainment assets to Disney. The only things that they kept were the media assets that were most vital. They kept their portfolio of 29 local, owned-and-operated, Fox-branded television stations. We’re going to come back to this, but this local-station portfolio is incredibly powerful because it’s effectively all the top 15 markets, okay? Yes, they don’t control the 2nd- and 3rd-tier markets, which is more in the purview of a Nexstar, on which I’ve been bearish. But through their local-market stations, the ABC stations, they can reach basically the entire country when it comes to news. Fox News, which I argue is the most profitable cable channel in the history of existence, is both a news channel and an entertainment channel, excuse me. They kept Fox Sports 1 and their sports properties, and they used that as a new base to grow. Now, 7 years later, they do this big deal. Fox is basically buying distribution. With this one deal, they immediately become a huge player in digital distribution. Through Roku, they get access to the front door—I use that analogy a lot, and that’s how executives talk about it—the front door of streaming. They get access to about 100 million connected television sets, all within North America, which is important. So, we’re not diluting it with a whole bunch of cheap subs or eyeballs outside the US. I think what’s incredible about this is that Roku, which I think many value investors have not paid a lot of attention to because, candidly, it screens expensive on earnings, had a lot of cash-heavy investment spending for years building up its platform. The devices segment doesn’t make any money. That’s the segment where they sell the little dongles. But since COVID, over the last couple of years, Roku has really shown itself to be a platform—a major platform. You can call it a new aggregator of both FAST, or free ad-supported streaming television, and it has become an aggregator, sort of a rebundler, of all the different AVOD—that stands for advertising video on demand—or SVOD, subscription video on demand. All the movie services can be bundled through your Roku, and they present it to you as one bill. So, I’m going to pause right here and just let that settle for a bit. But this is truly a transformational acquisition that I think gives Fox immediately a front door to the power of streaming. They’re going to have a hand in shaping the industry going forward. And when they combine their media assets with Roku distribution, wow, it’s a pretty powerful combination. Andrew Walker No, that’s great. That’s a great overview. And look, I’ve gotten quite a bit of pushback, actually. But I do think one thing that’s interesting here is—and you’ve got this in your piece—I did not realize the long history of this, but Roku relaunched their homepage about a month ago, right? If you followed Netflix over the past 10 or 15 years, there was always this line that stood out to me: “What’s the most valuable space in media?” Everyone said it was the Netflix homepage, right? Because you could put literally anything up there—any TV show, any movie—and if you put it on the Netflix homepage, it was going to be a top-10 property in the entire United States, or the entire world, really, right? And Roku’s got a little bit of that. They’ve got that Netflix-like Roku homepage. I was reading a transcript from early June—now, I’m sure they were in deal talks at this point—where the CFO of Roku was talking, and he said, “Hey, we launched this homepage and we instantly started signing up all these partners.” The first partner they mentioned was Fox, but then they mentioned Comcast, and then they mentioned Netflix. It’s not lost on me that they redesigned the homepage and then instantly they were for sale. I wouldn’t be surprised if they went to all the potential bidders—I’m sure Comcast was in there, and I’m sure there were several others—and said, “Look at the results you’re seeing on this homepage and imagine if you could control this. This is your one opportunity to get the Netflix homepage that you’ve always wanted, right?” You load it up, you’ve got a new show, and you say, “Hey, forget what everyone else is paying. We’re just going to boost this new show. We’re going to boost this new property.” So, I think that’s interesting. And if I can just riff on it a little bit further, your article—I did not realize this—but you write about Anthony Wood, the CEO, founder, and entrepreneur. For a long time, he was rejecting calls to redesign the homepage. He was rejecting calls to put advertising from anything that wasn’t television out there, and he really had to be pulled there. It reminds me a little bit of Jeff Bezos, right? For a long time, people were telling him, “Hey, we should redesign the Amazon homepage,” and all this sort of stuff, and he said, “No, no, no, no, no,” right? He’s an entrepreneur; he can do that. Maybe he had a long-term vision, but I bet Fox looks at this and says, “Hey, we see the results from evolving that homepage. We see what we can do.” So, I’ll pause there. I’m going to give a lot of pushback, but if you want to riff on anything there, that was just something that really jumped out to me in terms of the strategic logic. Simeon McMillan I think everything you said there is incredibly relevant. For your listeners and viewers, in my second article—I’ll probably do a third—it was all about giving people a history that they didn’t realize had happened, of the ways that Roku had done some self-help to improve themselves. My personal philosophy is that I think investors sometimes focus too much on founders and CEOs. I think there’s sometimes a little bit too much psychoanalysis that goes on. However, there are some instances where the head honcho up top can set the direction. In my piece, I want to give proper credit. I cited a deep dive from last July. Okay, so this was July 2025. About half of my piece was focused on this article from The Information, where it was all about the education of Anthony Wood and how he had to be forced to do some of the basic blocking and tackling when it comes to media ad sales. Now, my first reaction was that this was crazy that it hadn’t been done before. We can pause on that. But stock prices are about the future and not the past. So, now that we’re here, what does the information do? Well, on Accrued Interest, I try really hard to bring to your attention the strategic things that are not on the spreadsheet or in the financials. And one of the things that executives don’t do—and I know this from working with them—is tell you what they had not considered. But to your point about the power of the Netflix homepage, I think—and actually, I didn’t even mention Netflix in my article—but I think that is exactly the perfect analogy. For your listeners, I’m going to go into my radio mode here, so just use your imagination. I don’t have any graphics on the screen. If you have a Roku, please open up the Roku, or imagine the home screen. Most of it is just static tiles. It looks very much like your cell phone, okay? Very recently, they started adding a few buttons or tiles that are for you. Oh, excuse me, I misspoke. The only example they’d done of this before was that they used to sell—and I guess they still do—quick-access buttons on the brand-new Roku remote. So, if you want to pay up for that real estate, you can. And then I also mention this in the piece: As more and more Roku users and streaming-television users are accessing the platform through the operating system and not through the streaming stick, the competition changed for Roku. I’m not sure what the one bell or the one idea—the light bulb—that popped over the CEO’s head was to decide, “Why now?” I think it was probably several things. I think, yes, you had a tremendous opportunity in the unlock of the homepage. I would say that what’s really amazing about this is how much of this was completely wasted. And let’s just move off the homepage. There are some other basic ABCs of ad sales that they didn’t do. This is ugly. There’s probably nothing they can do here. I was not aware that the CEO said, “You cannot take ad money from any advertiser who is not in the media sector.” Now, that’s crazy. That is absolutely crazy—turning away money. The thought process was that he thought he was keeping the platform clean and visually pure. His thought was, “Well, you would be less inconvenienced by getting ads from other TV shows than you would be by getting a QSR or Allstate Insurance.” But anyone who turns on television knows that you have so many other different ad formats. In fact, I can tell you from experience that the biggest advertisers in local television are typically auto dealerships, for example. Okay, so that number would have been up there before. Suffice it to say, there’s a lot of low-hanging fruit that you wouldn’t realize was there when you look at the purchase multiple, because on paper it looked a little bit expensive. I don’t have my numbers in front of me, but I want to say that Fox was buying Roku at an enterprise value of $22 billion—I’m sorry, at 22 times, I believe, enterprise value to EBITDA, or something like that. But if you actually look below the surface, because the ad revenue is just beginning to inflect, and if you use management’s estimate of about $1 billion in free cash flow in 2028, they actually purchased it at about 22 times EV to free cash flow. And if you add some light synergies, that drops to about 16 or 17 times EV to free cash flow, which I think is a whole lot cheaper. In a future piece, I’m going to talk about all the different ways that Fox can take a lot of its media properties and just feature them on the homepage. They can drive more sign-ups to FOX One. They can drive more sign-ups to Tubi. They have a lot of sports shows. One thing I think I’m going to discuss in the future piece is that, with Disney assuming full control of Hulu—and Hulu is about to be rolled into the Disney+ app—there really isn’t much of a neutral Switzerland, third-party space where you can operate if you’re a streaming provider. So, I think we’ll never know for sure why now, but I think there are a lot of big changes coming that Roku said, “Hey, look, a lot of things are changing in the next 2 or 3 years. Let’s partner now, and we can drive where this industry is going.” Andrew Walker Well, let me push you. You’re obviously bullish on this merger, right? And I certainly see the upside in Roku, right? But, you know, everything has a price—a price for everything. And I think the market is not bullish on this merger, right? Fox’s stock has gone from $60—I think $61—the day before this deal was announced to, as you and I are taping, under $45. So, let’s just say it’s lost 25% of its value in 2 weeks in a flat-to-rising market. I’ve got some of the loose comps over here. They are—where are my little loose comps? Simeon McMillan Right. Andrew Walker So, this is purely a—oh my God. And now, there is something that shareholders thought they had in Fox. They had, like, a pure-play capital return— Simeon McMillan Right. Andrew Walker —on the back of the streaming service. So, I’m sure there’s a little bit of that, but shareholders don’t like this deal. And I think one of the reasons why is that, again, even if you see a lot of the upside in the Roku platform, that’s available to everyone. They’re paying $22 billion, so you’re sitting there and saying, “The winner’s curse.” I think this was obviously very well shopped. And they’re coming out and saying, “Hey, a $22 billion deal, $400 million of cost synergies.” You kind of look at that and say, “Whoa, that’s not a lot on a $22 billion deal where you’re paying a pretty big premium here.” And I’ve got more thoughts, but I’ve shared the high level. I'll toss that general skepticism—big premium, low cost synergies, well-shopped deal—over to you. What is the market missing? Simeon McMillan Sure. I understand the market's reaction. What's that phrase? “The market in the short term is a voting machine; in the long term, it's a weighing machine.” I absolutely understand the market's reaction. Generally speaking, M&A—we all know the track records, we've seen the stats—generally, all the value goes to the seller and not the buyer. Andrew Walker And that's M&A in general, but media M&A is like steroids: all the value goes to the seller. Simeon McMillan Exactly—especially in media M&A. Media M&A has a whole history of generally just bad deals. That's why I spent so much time in my first piece and some other pieces I wrote—your readers can go to my archives—explaining, “Look, Fox is the most long-term of all these people.” I don't have the final precise numbers in front of me, but the $22 billion that they're paying for Roku is a fraction of what they sold their entertainment business for. So, they actually are using a smaller amount of capital. I'm not a performance analyst. I don't tell my subscribers, “Hey, follow my picks and you're going to beat the market every quarter or even every year.” What I think the market is doing is having a rational, although misguided, short-term repricing of the current opportunity set. I think the market is overly focusing on the trailing financials. The last couple of years for Roku have been—I think they've been nonrepresentative—because, frankly, they spent so much money that they're not going to spend going forward on building up their platform. So, the margins are already inflecting, and investors are not going to give you credit going forward. I also think investors in media have a bit of a short-term memory problem. There have been many pure-play media examples where investors celebrate them being pure-play and say it's a good idea until it isn't, okay? We're not going to revisit Versant; I talked about that a lot. An example that I talked about in my Versant articles that I want to bring up is Viacom, okay? This is the old Viacom before the Ellisons got involved. For a decade before I was in business school and while I was in business school—you guys, I don't have to name the names, all right?—I picked on David Einhorn. I'm not going to pick on anybody else. A lot of famous investors came out and said Viacom was smart because they're pure-play. They're not doing this, they're not doing that. All the money is going to buybacks. The risk here, I think, is not that the stock dips for a quarter or a year. I think the risk is that you find the company permanently impaired. Their earnings are permanently impaired, and they can't grow. Then, in 2 or 3 years, when you realize that, it's too late; you have to start getting desperate, and then you have to start doing these deals that are real Hail Marys, which is effectively what CBS got with Paramount. Something else I think Fox shareholders, whether or not they realize it, need to do is just have an honest, hard look in the mirror. Fox—and I think some writers began to pick up on this, but it was in the narrow context of bidding for sports rights—if you look online, some of the more bearish articles on Fox over the last quarter, I would say, have come from analysts and reporters who've been saying, “Look, NFL rights are getting more expensive. Everyone knows; I don't have to tell you.” They say, “Look, Fox is the smallest of the big 4 networks without a big brother or a parent company who can help fund this increasing arms race for sports rights.” This deal was not necessarily about sports rights, but you need to be clear: Fox is on an island. Fox was always going to have to bulk up, quite frankly. I think the future of going alone was much more dangerous for Fox than it was for Roku. I also think it was great that Fox used about 60% cash for this deal, okay? At the end of the day, on a market-cap basis, I think both companies have equal market caps, but Fox is going to have about 70% of the company going forward. So, I think that sometimes you're going to have to look more than a quarter, even a year, out. I think in 2027 and 2028, the numbers are going to make a lot more sense. Revenue synergies never get discussed in these deals, and for the right reason. While I understand $400 million in cost synergies does not look like a lot, I would tell you the revenue synergies here are very real—much more real than the Paramount Skydance–Warner Bros. situation, where you had 2 content providers combining. Here, you have a major content provider taking over distribution. One thing—I want to give a little preview, and I'll pause here for a second—is that I have some future articles planned. I want to do more strategy pieces, and I want to tell Fox shareholders, if you're listening, and everyone else out there: let's look at what all the other streamers that are not Netflix, Paramount, and YouTube are doing, okay? About 1 or 2 months ago, Roku struck a deal with the CW Network, all right? The CW Network—you could call it the 5th broadcast network, a distant 5th—is owned by Nexstar, which I'm bearish on. Nexstar, which owns the CW, came to Roku and said, “Hey, Roku, let's strike a deal where Roku becomes the streaming home for our shows.” Nexstar's CW then took its sports content and went to ESPN and ESPN+, saying, “ESPN+, why don't you be the streaming home for our sports?” So, you have more and more rebundling and consolidation happening. I think it's not clear today. Today, it looks fine, but you're going to wake up in 2027, and certainly 2028, when everyone else is going to be partnered up. And Fox now—I would say I'll pause on this moment—Fox, through this, and this is bigger than money, is no longer tied to the cable bundle. Andrew Walker I'm sorry? No, let me just ask you a different one. Simeon McMillan Sure. Andrew Walker I think, if I'm just listening, you are really bullish on Roku, and I think you have respect for Fox's management team, and you know— Simeon McMillan Yes. Andrew Walker They did sell at the top in 2019. Now, I would push back and say, “Hey, they probably could have shopped that better, because if Comcast couldn't come with a hostile offer, it would kind of prove that they sold 40% too cheaply, right?” But they did sell at an opportune time there. I think you think they think long-term strategically, and I think you're bullish on Roku. What the market—and the market could be wrong, right?—but I'm not hearing a lot of, “Hey, Fox and Roku together is a much better combo,” because a lot of what you're talking about are things that anyone could have gotten, right? NBC buys this, they could have gotten this; Fox buys this, anyone could have gotten it. And the revenue synergies—it just isn't clear to me that putting Fox and Roku together and saying, “Hey, I'm going to give myself preferential treatment on that front page,” is better than, “Hey, Roku is Switzerland, and the highest bidder can always come and have that front page,” right? Anyone can bid. They're always just tearing each other up, kind of like the top bidder on Google search words, right? Google doesn't need to own GEICO to have the insurance premiums—the insurance-bidding words—go way up. They're happy to work with anyone. So, I think you're really bullish on Roku. I'm not sure if you're bullish on the Fox-Roku combination. And I think that, because you're really bullish on Roku, you're bullish on this deal and bullish on the price. I'm with you: 22 times 2-year-out free cash flow for a growing platform that takes 50% of streaming actually seems cheap to me, particularly when there are all these levers, as you pointed out, to pull. But I'm not seeing the bullishness on the Fox-Roku combination, if that makes sense. Simeon McMillan Sure. I think that's a great segue. Let's talk a little bit more about what Fox can do with this, okay? There are 2 things that I think. One, I think, is how they could grow their platform. We'll get to that in a second. But I really just want to stay on a big theme I've been driving home to my subscribers: I think investors are still underestimating cord cutting, okay? That's just an observation of mine. I think what this does for Fox in the short term is that it helps them stem the bleeding. Here's how I look at it: Fox, along with all the other networks, has a situation where cord cutting is happening and the profits from linear are decreasing. We don't have to argue that again, okay? Here's what's relevant, and I'll just go in order. NBC has Peacock, right? If you do a deep dive on Comcast, you'll see that they're spending a tremendous amount of money to prop up Peacock and sports rights and a whole lot of other things. It's very, very expensive to operate a network. Andrew Walker The Olympics, the Super Bowl and wild-card games, and now the new NBA package. I mean, my God. Simeon McMillan Yeah, 100%. Very quickly, Paramount Skydance was spending a whole lot of money to prop up Paramount+. Warner Bros. is going to have to spend doubly, because they're still running HBO Max—or HBO, whatever they're calling it nowadays—separately, all right? So, I think there's a tremendous cost to streaming that often gets overlooked, and Fox is not going to have to do that because they have Roku as their output. So, there's a savings of money that they don't have to spend. There's also, I think, an increase in negotiating leverage. The negotiating leverage that Fox has for every future distribution deal goes up because their BATNA—their best alternative to a negotiated agreement. In Accrued Interest, I argued—you threw out Disney. Yes, Fox has underperformed Disney over this period. But I read that Disney underperformed at the beginning of the year or at the end of last year. It's been stuck around $100 for how many years? Disney is sort of the poster child of that. It never looks that bad, but, oh my God, we've been underperforming the market for 10 years. Bob Iger is really cool and well-liked, so people aren't putting his feet to the fire, but we'll see if that happens with the other guy. I think I'm bullish on Fox because this will help them get better deal terms than they would have gotten without it. I think what investors also forget is that the number-one distributor for pay-TV channels is YouTube TV. That happened last year. Some of what I talked about in “Why I Was on Perform” is that people don't realize how much of a bloody nose, a black eye, YouTube TV gave Disney when they punched Disney right in the mouth last year. They had a very bitter carriage dispute where they dropped Disney and said, “We don't care if we miss NFL games.” Then they won, and Disney came back on YouTube TV's own terms. Disney was forced—and this is something investors don't appreciate because it's not in your face—to give the premium sports that Disney bought for its streaming service to all of YouTube TV's subscribers. I think that's a consequence that's going to have huge ramifications down the road. You have all these other competitors who are burning cash on their streamers, and they're going to keep burning cash on their streamers because YouTube is going to say, “Oh, no, no. All that free stuff you gave, give us that, too.” Fox never got in that race. They're never going to have to get into the race, and YouTube is never going to be able to pull this with Fox because YouTube is going to say, “Okay, we'll go around you.” I think all of that is huge for why I'm bullish on Fox. This is a little preview of what my next piece is, but the Fox piece that I'm most bullish on doesn't even have Fox's name on it. That's Tubi, the streaming service called Tubi. Andrew Walker I was surprised by the merger agreement. I haven't read it since 2 nights ago, but if I remember the call and the merger announcement, they say Tubi right up front, right? Tubi and Brooklyn. For those who don't know, Tubi is, I think, the largest free, ad-supported streaming service out there. Fox bought it for around $400 million in 2020. I was surprised they were saying, “A big piece of the deal logic is the Tubi-Roku combination.” If I'm bearish, I'm saying, “Tubi plus Roku? Any FAST channel can just pay Roku right now. Roku can be switched in, and every FAST channel can pay.” Roku, by the way, has built up its own internal offerings. They were kind of starting their own internal things. So, I look at that and say, “Fox paid $400 million for Tubi. I think a lot of people were bearish on Tubi because, yes, it was growing quickly, but Fox was putting a lot of that into it, as you're kind of leading with the Disney content.” As Charter has said about all the ads, “Hey, if Fox invests a lot into content and then pumps it through Tubi, yes, Tubi grows quickly, but it's kind of getting subsidized by everything else, right?” It's interesting you bring that up because I picked up on that, too. I wonder if that's Fox doubling down on a strategy where they're making all this investment elsewhere, Tubi grows quickly, and they think that's awesome—but without that investment, which generated huge losses elsewhere, it kind of wouldn't be growing quickly. It's kind of non-economic growth, if that makes sense. I threw a lot out there. I'll toss it back over to you. Simeon McMillan Sure. As you mentioned, Tubi isn't Fox-branded; it's never been Fox-branded. On Accrued Interest, I would cover a lot of the Nielsen monthly TV-viewing reports. This is a very imperfect guide before anyone argues with me in the comments. I know Nielsen's measurement isn't perfect, but what's important is the trend. One thing I was covering for a while—actually, about 2 weeks before this deal happened—I wrote an article saying, “I'm dropping coverage of FuboTV to cover Roku.” In other articles, I talked more about Tubi. One thing I think is really important is that Tubi and the Roku Channel are very complementary in ways that aren't obvious. For any of your listeners or viewers who haven't watched Tubi, please go sign up and give it a look. It's free. Tubi, I think, has become a destination where a lot of media companies have been putting their library content while taking it off their own streaming services. For example, when Warner Bros. was trying to save money and took off a lot of its old shows that it had paid residuals on, it was taking its stuff off HBO Max. People were complaining. It's not like they were watching those shows anyway, but they were complaining. Warner Bros. quietly put those shows on Tubi. So, I think if you go there, you'll be very happy. Tubi has about 100 million monthly active accounts, which I think is crazy. People don't realize that, in terms of television viewing, Tubi has somewhere between 2% and 3% of big-screen television viewing, almost equal to Prime Video. If you combine the online viewing between The Roku Channel, Tubi, and the other Fox properties—again, with lots of asterisks—it's about equal to Disney. In my first piece, I had an interesting slide that showed how their combined reach is now equal to Disney, even after they sold Disney all their networks a long time ago. Here's how the Tubi-Roku combination works. In the conference call, they went through some of the math. They're at about 100 million households, with about a 1/3 overlap between the 2 audiences if you deduplicate them. If you combine them, as an advertiser, they said they weren't going to combine the services, and I believe them. But they will be selling them together. I have no doubt. I try to stay away from TLAs—three-letter acronyms—and jargon, but think of Tubi as a major leader in free, on-demand streaming. It's a little Netflix-like, but you pick the square. They don't do the sit-back, linear-style experience where it just keeps playing. The Roku Channel is almost all linear-style streaming television. So, you basically have the AVOD, advertising, and the SVOD, and you combine them. You triple the reach, and you have a very powerful tool that you can use to sell a whole lot more digital revenue. What's going to happen with Fox—and this is the part that you don't see explicitly—is that when Fox goes into these upfront meetings, they sit down with sellers and have their whole menu. They'll need to have Fox on the brand so they can say to the media buyer, “Okay, you're taking this money off of our Fox properties. Now they have so much more real estate where they can put it directly on digital.” I think the combinations for Tubi are really tremendous. Fox put the Super Bowl on Tubi for the first time 2 years ago. It's very possible that the next time Fox gets a Super Bowl—as the broadcast networks rotate and take turns once every 3 to 4 years—you could have a Super Bowl on Roku, Tubi, and linear. So, I'm bullish on Fox through Tubi and through the rest of Fox, to answer your question. Andrew Walker One more question. You mentioned earlier that everyone always thought Roku's endgame was a sale, right? Simeon McMillan Yes. Andrew Walker It was actually asked by Rich Greenfield on the earnings call: Why now? So, I ask you the same question: Why now? I understand it from a buyer's perspective. All the buyers looked at the homepage and said, “Oh, look at this lever, this lever, this lever.” To some extent, as a seller, you're letting the buyer paint their own picture. But as an entrepreneur who's built this, I'd have to think the homepage and a lot of where the industry is going are really exciting. You chose to sell now. You didn't choose to sell 2 years from now, when that homepage is really growing. You didn't sell as the media landscape continues to evolve. You chose right now. Why do you think they chose right now? Simeon McMillan I think they chose now because the shift in marketing and ad budgets—however you want to describe it—I think ad budgets, as well as TV viewing, for the first time over the last year or 2 began to go from less than 50% streaming to a majority streaming. I think that's a shift that it feels like we've been talking about cord-cutting for over a decade now. All right, you've been talking about Netflix and streaming in our lives for a long time now. So, I think it's very easy, if you haven't followed the space, to think, "Oh, this is old news." But it really hasn't been. I know Nielsen and their chart—again, lots of asterisks—but over the last year, or the last quarter or two, was the first time that streaming viewing on the big screen actually went higher than linear. So, I think probably why now is that, well, we're at that inflection point. Also, the number of buyers is shrinking. It just objectively is, okay? So, yes, from a pure high-price standpoint, yeah, they probably should have sold for more when there were more companies in the race, but I think they had a very motivated buyer. It didn't take a whole lot of debt. I think people really underestimate just how lucky Warner Bros. got, frankly, in having Paramount come and be willing to spend effectively anything to buy them. There aren't many buyers out there like that. Andrew Walker You are right, but the history of media—and Roku is more distribution than media—but you are right, the history of media is that there is always one, right? Whether it's the Japanese conglomerates in the '80s or Coke in the '80s and the '90s, or, you know, Sumner Redstone, there's always one. So, I hear you, but I think when you hung up the for-sale sign on Batman and Superman and HBO, I think you always were going to—you'll just always find one. Let me slightly shift. One thing I have been thinking about with Roku—and, again, I think about the incentives and stuff all the time—is that I think I might be telling myself a story, but I have been wondering if they were starting to realize that the buyer pool was shrinking. As you said, I think you hit the nail right on the head. The buyer pool was shrinking, right? Paramount might have been a buyer a year ago. That's off the table. Walmart, I think two and a half years ago, was probably the most natural buyer because they could be Switzerland on the distribution, and they could sell the TVs up front. They bought Vizio, so Walmart's off the table. Amazon's out of the cards. Amazon, 5 years ago, probably 10 years ago, would have been a natural buyer. And antitrust? That ain't happening anymore. So, you were starting to see these shrinking pools. So, I think you hit the nail on the head. The other thing I have wondered is whether AI is coming, and this might help us. I was reading something from YouTube's CEO to prepare, and he was talking about AI slop. He said, "Look, we would try to keep AI slop off, but if you had asked us 10 years ago, we would have said videos of people playing Minecraft. That was slop, and that didn't meet our brand standards, and we would have shut that down. And now that's one of the largest videos. You can't believe how many people consume it, and it helped launch the Minecraft movie, right?" So, I have wondered if Roku looked and said, "Hey, the AI videos are not there yet, but YouTube—core YouTube, not YouTube TV—Instagram, wherever you're getting AI videos, that's going to get a lot more attention. Maybe media distribution just gets a little less valuable because there is a limit on human time. If more time is getting spent on AI videos and watching them wherever you're watching them, and that's generally not Roku, there's less time on Roku. So, maybe they were looking at that too and saying, 'Hey, is a tail risk emerging?'" Simeon McMillan Regarding the prevalence of AI videos, I think that's a very good point that you raised. Just from watching how people consume YouTube, there's a whole lot of AI content there, particularly for children's content and younger viewers. They don't care as much if, frankly, there's a story or high production value. So, I definitely hear you on that. I think, in some ways, the proliferation of AI content just makes distribution, or controlling distribution, all that more important because, as you have more AI content, you're just fragmenting the media pie even more, okay? These AI videos or productions aren't coming from Disney; they're not coming from the big studios. These are mostly newer players, a lot of them overseas, and the reason they've been able to be so successful is primarily by releasing them through YouTube. They've been able to immediately get almost instant full distribution overnight. So, in the old model, if you wanted to make new content, AI or otherwise, you couldn't just put it on cable because you needed to control the channel. But now, with digital distribution, this is a little bit different. I know that through using The Roku Channel, they've actually been onboarding more user-generated content. I think what you'll end up seeing—I've seen this on Disney+ as well—is that you're just going to be seeing more user-generated content integrated into all these apps, and that's something that I think is incredibly important. A point I forgot to mention earlier in terms of why now, and I think this also is not as well appreciated: in my article, I mentioned how a lot of us—I'm an older millennial; some of your listeners might be too—still think of streaming as going through the dongles, through the sticks, or through your Apple TV box or your Fire TV box. I think Roku also saw, "Hey, look, as more and more of the distribution is being fought through the operating system..." We didn't talk about Walmart yet, but Walmart's a big player that's also behind the scenes because when Walmart bought Vizio, the television maker, what Walmart was basically doing is saying, "Hey, look, we want to get access to this streaming video ad inventory for lots of reasons, but also to pair it with our first-party sales data." For your listeners and your viewers, the holy grail in marketing and advertising is this: if you can pair up what users watch and what they actually do, all right, that is the holy grail. That is a huge reason why Amazon Prime Video is getting a whole lot more ad dollars without having any big hits, okay? So, I think Roku, to answer your question, is why they— Andrew Walker Having any big hits? Maybe Reacher. My God, it is the worst service imaginable. The bull case for Lionsgate is, yeah, Amazon messed up with MGM, but my God, they need something. Simeon McMillan Yeah. But once you look beyond the hits, it's like, okay, if more of the ad inventory is being controlled by whoever controls the operating system, I think Roku's basically saying, "Look, as a distributor, we're better off than media companies, but now we're competing with Samsung. We're competing with Fire TV. We're competing with LG." They don't want to spend money on devices. So, I think both of them need each other, and I think AI enhances that because more fragmentation is only going to make who controls the pipes even more important. So, if you can be someone who's rebundling, I think that's incredibly valuable. One of the smartest things Roku has is that Roku is basically—I put this in the piece—but in some ways, with the new TV guide, they're the one service where you can pull them up and ask, "Hey, where's this piece of content?" It'll show you every service that has it and give you a one-click drop-down. So, I actually think with AI, as more AI content comes, then, yeah, you're going to want to control the pipes because people don't care who makes it. They'll watch it anywhere. Andrew Walker Let me hit you with a gotcha question, but in a fun way. We talked about how you're bullish on Roku controlling the distribution, and I just mentioned AI, and you're bullish on more AI generation, all that sort of stuff. The reason this is a fun one is that if I replace Roku with Spotify, I think a lot of what you said would be true for Spotify, except probably on steroids, right? Because as you get more AI content on the Spotify platform, a lot of the fees that they were paying to the music labels go away, or the music labels' leverage goes away. The reason I mention Spotify is I was just looking through my notes and flipping through some other stuff, and you have an underperform on Spotify, right? Simeon McMillan Yes. Andrew Walker The reason it's a fun gotcha is that it's hard for me to marry your huge bullishness on the Roku platform with the bearishness you have on the Spotify platform. I just wanted to try to mend those two fences. Simeon McMillan Yeah, sure. I can thread that needle easily. I tell my Accrued Interest subscribers up front that I am very bearish on audio. So, the difference is that one is audio and one is video, and that, my friend, is a huge difference between them. One of my—actually, I think it may be my most-read piece and, therefore, my most-subscribed piece—is called "The Pokémon Theory of Media Investing." Aside from being an excuse to make a lot of Pokémon 16-bit Game Boy graphics with lots of different companies, I argued that your media type—just like you have a Water Pokémon or a Fire Pokémon—matters: whether you're audio-first, video-first, or display-first determines what you can then evolve into. My issue—and I've written about Roku and will be writing about it more—is with Spotify. Spotify being audio first means there's always going to be a ceiling on ARPU. I'll get straight to it: there's been so much talk about the cost of the labels, which I get. A fun fact that I don't know if people realize is that when the labels redid their deals with Spotify, they actually give Spotify cheaper royalty rates the more subscribers it signs up. So I don't think the relationship is as antagonistic as people think. I actually am a little bearish on AI music. I think music's a little different, again because audio's a little different. But all my personal tastes aside, the issue with Spotify is that I think they're always going to have trouble raising ARPU because the CPM—the cost that people are willing to pay for an audio advertisement—is always going to be lower, and it's going to grow more slowly. And because music, especially music, is the same on all the services, you have some exclusives. You have less exclusive video than you used to, but there are some things you can only get on certain streaming providers. But if it's a new Taylor Swift song or a new song like that, it's going to be everywhere. I think YouTube Music has a lot more opportunity to take money out of the Spotify bucket than Spotify has to take money out of the Netflix, YouTube, or other video buckets. We can talk more about Spotify or whatnot, but I think audio is always going to be the little brother. It's always going to be the weakest of the ad formats. There's a lot of good experimentation going on there, but that's my issue: the lack of ad volume. Andrew Walker Look, I asked that on a lark because I looked at it in Familiar Five. I was just trying to marry the two. Obviously, the audio is different, but it does strike me that a lot of the bullishness that you have on Roku, if you just covered your eyes, would be the same for Spotify. I definitely hear you on the video, but that is a company that has killed the doubters time and time again. As somebody who probably listens to Spotify for 14 hours a day because I've always got it on, I listen to my Final Fantasy lo-fi remix while I'm working a lot. I just started that. Let me go quickly. We've got about 5 minutes left, and then my wife's coming to have a quick coffee with me, so we're probably going to have to hang up on all the listeners for that. The 1st area you and I have traded a few notes on is Google and Meta. I think we've traded a few notes offline. The market's pretty skeptical. Google is hard to talk about because are we talking about its AI, YouTube, core search, Waymo, or the SpaceX investment? Meta is a little more direct, but I think, if I remember correctly, you've got strong buys on both. Meta is fascinating to me because it's a big company—a $1.5 trillion valuation—but the core business is doing great. It's interesting that everywhere AI is spiking like crazy except for the Magnificent 7's AI efforts, right? Microsoft's down year to date, Meta's down year to date, Amazon's flat year to date, Google's shine is coming off, and people are saying, “Oh my God, this CapEx.” You look at Micron—to the moon—and Nvidia—to the moon. It's actually kind of hard to marry those two because if the market's going to penalize these guys at some point, Google just did that big raise. If they can't raise any more, they're going to start shutting these down. And I would just point out one last thing on Meta. Sorry to ramble. They have their lab—which you can tell me if I'm wrong—is probably the 4th-best lab behind Anthropic, OpenAI, and Google. So it's probably the 4th-best AI lab. I look at this and say, if you add back Reality Labs, you're buying core Meta at maybe 11 times, actually after-tax operating profit, for a business growing 20%. And what is Meta's AI lab worth? It's the 4th-best lab. I don't know: if SpaceX bought xAI for $250 billion, is it worth more than that? It just goes crazy. So I'm just rambling because I am fascinated by them. I'll throw it over to you for the last few minutes. Simeon McMillan Sure. So, look, one thing that's been exciting for me: I just turned 40 this year. Andrew Walker You're an old man, my friend. You're an old man. I just turned 38, and I pity you and your creaky joints. Simeon McMillan Us elder millennials. So I literally grew up with Meta, which in my head I still call Facebook, and Google. And I am thrilled to say that finally, in my professional life, I think these are true value stocks. What do I mean by that? I think they're true value stocks in that—and I'll throw Netflix in here, although I'm going to keep it to Google and Meta—their cash flow and earnings are there. They're strong and growing substantially, and they're perennially doubted. They're perennially doubted, and you're seeing the multiples contract. What do I think about it? I'm again glad that I don't pitch stock options, so the timing is unsure. I have a note that I just wrote to myself: people didn't believe in Google for a very long time until they did. And when you have the re-rating, the catch-up can be fast and abrupt. Let me be a little more concrete. I get the skepticism on both companies. I think that the skepticism is going to be there as long as the big spending is out there. As long as they see the CapEx and the spending is very high, I think the skeptics are going to be there until that dials down. But what gives me confidence is that the revenue at both companies is strongly reacting. You're seeing—and I tell my subscribers, I like to look at ad impression growth to get a sense of volume—ad impressions are spiking. So the AI is helping them deliver ads more effectively. Pricing is also staying strong. I think both of these companies—I want to be on the record as going long on them—because eventually they're going to pull back on the spending. As long as the revenues and the profits stay there, I think the stocks can be re-rated. I think something that people may appreciate—and this might be a benefit; I don't have a fancy word for it, and this might be in a future article—is that there's something about being a conglomerate. You talk about the conglomerate discount. I think there's a complexity discount, where a lot of investors tend to think about 1 aspect of a company and not the other. I'll say very quickly on Meta: I think the biggest underappreciated aspect of Meta is their enterprise tools. Meta just announced they're selling subscriptions for Instagram, WhatsApp, and a lot of the other services. I think Meta has a line of sight to billions of dollars of additional revenue in tools that the consumer never sees, but I see because Meta is really a small-business advertising platform. Similar to Google, I don't have a lot to dispel the doubters. I just know that they're cheap. They're getting cheaper. And as long as the revenue keeps accelerating, I feel pretty good about that. Andrew Walker I think Meta is just really fascinating. And look, we're about to have the 2nd blockbuster Sorkin movie about Meta this year. I'm not breaking new ground by saying it's fascinating, but I think it is fascinating. You think back to 2022, when Meta stock bottomed at under $100 per share and people thought Zuck was going to light everything on fire for the metaverse, or whatever they renamed it. Then they go through the year of efficiency, and the stock is at all-time highs. Maybe 8 months ago, people were saying, “Spend everything on CapEx.” Now people are really questioning it. I do think Meta is such a fascinating case study in: is Zuck's long-term vision worth it, or would the company be better without voting-control shares? You mentioned the conglomerate, and that's right where I was going, because would this be better if you had the core Meta business—Facebook, WhatsApp, and Instagram—separate and off to the side? Then you had Reality Labs as a standalone, separate company that needed to justify its own spending and needed to go raise money. All of it—the metaverse stuff, Reality Labs, all the AI stuff—I do think that's interesting, because you read The Information articles, and there are lots of leaks that the employees at core Facebook feel like 2nd-class citizens. They look at the big bonuses that the AI researchers are getting, and they look at how everyone's being forced to do everything. It's just a really fascinating case study of the founder-control structure with a visionary versus, hey, would these be better if you got the discount? They're about to go raise equity. Guess what? If your equity is discounted and you're raising equity, maybe it's still a good ROI, but it's going to be a lot worse for your shareholders. It's just fascinating stuff, man. Hey, I'm going to have to wrap up in 1 minute, but there's so much more we could talk about. I had a great time chatting. Any last quick thoughts you want to hit or anything? Simeon McMillan Sure, yeah. No, I just want to thank you for the time we were recording this. Andrew Walker And we're going to get you the shirt. Absolutely. Simeon McMillan No, thank you. No, no, yeah, no, I just want to thank you for the time and for all your listeners and subscribers. I'm going to stick to value investing. I'm going to stick to telling you which companies are growing their earnings power. The market might disagree in the short term, but I'm going to keep focusing on earnings. I think that if we focus on that, the decisions we make today will look a lot smarter in 2027 and 2028, and that is sort of my North Star. Andrew Walker You're giving me some hope for my life. So, Simeon, this is great. That's our Q2 media checkup, folks, on Roku. We'll definitely have you back on for Q3. We'll talk to you, buddy. Simeon McMillan Thank you, Andrew.