Yet Another Value Podcast - $FOX dropped 25% buying $ROKU. Is the market wrong? | Accrued Interest

Episode Date: June 28, 2026

Fox's stock is down about 25% since it agreed to buy Roku for $22 billion, and the market has decided the deal is a blunder. Simeon McMillan of Accrued Interest thinks the market is wrong. His case: Roku controls roughly 44% of how Americans reach streaming on the big screen, about 3x the next platform, so Fox just bought the "front door" to streaming and around 100 million connected TVs in North America. Look under the surface and the deal is closer to 16-17x free cash flow once you account for Roku's barely-tapped ad levers and synergies.We get into the homepage that became the new "Netflix homepage," why Fox keeps making the smartest M&A bets in media, the Tubi sleeper Simeon is most bullish on, why he loves Roku but is bearish on Spotify, and why Google and Meta look like "true value stocks" to him. I push back hard on whether Fox plus Roku is really better than Roku staying neutral Switzerland for every bidder.See Simeon's post on Fox / Roku here: https://www.accruedint.com/p/the-strait-of-roku-how-fox-seizedThis episode is sponsored by my upcoming AI webinar with AlphaSense.The AI landscape has never been more crowded or more confusing. Everyone's telling you to adopt AI, but almost nobody's telling you which tools actually give you an edge. I'm sitting down with Dave Wang of Wall Street Prompt and Ben Collins of AlphaSense to break down the modern AI stack for investors, from horizontal platforms like OpenAI and Claude to agentic workflows and finance-specific intelligence tools, and where each one actually fits in a real research process.Register here: https://www.alpha-sense.com/resources/webinars/choosing-your-ai-stack-a-framework-for-institutional-investors/?utm_source=pt_YAVP&utm_medium=sponsored&utm_campaign=SWB_DG_06-25-26_IMP-GENAI_CORPFS_YAVP-AI-SolutionsChapters:00:00 What's coming: Fox-Roku, plus Spotify, Google and Meta01:08 Sponsor: my AI webinar with AlphaSense02:24 Guest intro: Simeon McMillan, Accrued Interest03:05 The Fox-Roku deal and why Simeon thinks it makes sense05:30 Roku as the "Strait of Hormuz" of streaming (44% of viewing)06:25 Why Fox has the smartest M&A team in media07:55 Buying the "front door": ~100M connected TVs10:03 The Roku homepage as the new "Netflix homepage"13:44 The ad-sales levers hiding under the multiple16:31 Valuation: 22x EBITDA, ~16-17x free cash flow with synergies18:01 My pushback: Fox down 25%, winner's curse, thin synergies19:35 The real risk of staying pure-play (Viacom, Paramount)24:51 Rebundling and why everyone's partnered up by 202826:08 Is Fox+Roku actually better, or could anyone have bought this?28:01 Cord-cutting, YouTube TV, and the Disney bloody nose32:07 The Fox bet Simeon likes most: Tubi38:30 Why now? The 50% streaming inflection and a shrinking buyer pool42:21 Does AI slop break or boost the distribution thesis?48:06 The gotcha: bullish Roku, bearish Spotify (the Pokemon theory of media)52:22 Google and Meta as "true value stocks"56:55 The complexity discount, Meta's enterprise tools, and founder control59:13 Wrap and where to find Accrued InterestSimeon McMillan / Accrued Interest: https://accruedinterest.substack.comLinks:Yet Another Value Blog - https://www.yetanothervalueblog.comSee our legal disclaimer here: https://www.yetanothervalueblog.com/p/legal-and-disclaimerProduction and editing by The Podcast Consultant - https://thepodcastconsultant.com/

All right. Hello and welcome to yet another value podcast today. We've got one. It's a great one. You're really going to enjoy it. We've got Simium McMillan from Accrued Interest back on the podcast. This is his second appearance. His first appearance got such rate reviews. We said we're going to do just a quarterly media tech, TMT podcast check-in. And the good news is we're coming up on the end of Q2 and we've got a ton to discuss. So we mainly focus on the big news in the media space this quarter, which is the Fox Roku deal. Fox is a deal to buy Roku. And, you know, you know, the market has kind of spoken and said it does not like the deal for Fox. Fox's stock is down probably 25% in the two-ish weeks since they announced. And Simeon has a much different view. He's very bullish on the merger. And I'd say particularly very bullish on Roku. So we're going to dive all into that. And then at the end, we're going to quickly talk, hey, what about Spotify?

I kind of throw that one in there as a fun, a little bit on Google, meta, that type of stuff. So we're going to talk about all of that. It's great podcast. There's a reason we're trying to do a quarterly media check-in with Simeon because he knows his stuff and he's a lot of fun to talk to. So I think you're going to enjoy that. If you like Accrued Interest, if you like Simian, you should go sign up for Accrued interest. There'll be a link of the show notes.

We're going to get there in one second. But first, a word from our sponsors. This podcast is sponsored by Alpha Sense and more specifically my upcoming AI webinar with AlphaSense. Look, the AI landscape is crazy if you're investor. It's crowded. It's confusing. Everyone's telling you to adopt AI, but nobody is telling you what tools to use. How do you adopt AI?

Should you be focused on using this as a superpower? Google, should you be? be building your own twos, how do you get used to it, all of this sort of stuff. I personally find it's a lot of experimentation. It's a lot of fun, but it's really confusing and it's really scary. So anyway, I told AlphaSense about my problems and they organized a webinar to try to help out. I'll be sitting down with Dave Wang of Wall Street prompts and Ben Collins of AlphaSense to break down the modern AI stack for investors. What horizontal platforms like OpenAI and Claude and Agenic workflows and finding specific intelligence tools where each one can actually fit

and help in a real research process. So if you're trying to get better at AI, improve, develop AI-enabled workflows, you're not going to want to miss this webinar. Join us on, we're going to record it next week, middle of June 18th, and it'll be going live June 25th. So there'll be a link to register in the show notes. And please, go free, lob in any questions you have on using AI, whether general tools or AI-specific tools like AlphaSense.

So thanks, Alphacin, and I'll see you for the webinar soon. All right, hello, and welcome to yet another value podcast. I'm your host, Andrew Walker. With me today, I'm happy to have on for the second time. Simeon McMillan from Accrued Interest. Simeon, how's it going? 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. 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. We're going to have you on quarterly. We're coming up on them in the quarter, and we got big news. So excited to talk all that.

Before we get there, disclaimer, remind everyone, nothing on the show is investing in advice. Always true. See the full disclaimer at the end. end of the podcast, we're on the show notes. Again, Simian writes accrued interest. Simian, you've been all over, accrued interest is all over everything media, everything, TMT, but you have been all over the past couple weeks, the big news in the media world, at least, which is Fox is buying Roku. You know, if I remember the timeline right on Thursday or Friday, we get an article that says Roku is for sale, and then on Monday, Fox, big deal.

So I'll pause there. I think you're bullish on Fox Roku. I can include a little. I can include link to that. You've done two pieces already, but I'll just pause and turn it over to you. How are you thinking about the Foxroku deal? Sure. So, Andrew, I think it's a great place to start just for your readers, listeners, subscribers, who might not have listened to me, excuse me, on my first visit, I'm the author, host, portfolio manager of accrued interest. I have a substack that has about 1,400 subscribers. So thank you to all the new folks who joined us. Currently, no paywall, totally free. So come get these free takes while you can, because like Roku, I will be charging more in the future than I do today.

I would say that, yeah, it's funny. It's interesting what deals leak and which ones don't, but I think the way that Roku news came out, it felt like that. Now, for your listeners, just a little bit of background. The big thing I do in recruit interest is I like to take a step back and look at recent history and not just the last quarter or two. So Roku has been fantasized as a takeover target, as 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 a founder and CEO Anthony Wood. So a deal wasn't going to happen until he got involved. So as you mentioned last week, or yeah, a little over a week ago was announced. They were exploring a sale.

Fox was announced as the winner. It does not look like any new bidders are coming. But, you know, it's June 23rd as we record this so things could change. I did two pieces. The first article, which I encourage you to read, which was a deep dive when I say, hey, here's why this deal makes sense. I saw some knee-jerk reactions candidly that this doesn't make sense for Fox. You know, what are they doing?

What's Roku strategy? I wanted to point out all the different levers within Roku to improve monetization that was just beginning to happen. At a high level to just a level set. And my last piece, and I honestly wish I came up with this metaphor for my first piece, all you need to know is I basically argued that Roku is a little bit like the Strait of Hormuz for streaming in the United States. I said the analogy was that the Strait of Hormuz, which has captivated the world and the geopolitics controlled about 20 percent of those oil supply. Well, Roku, which is primarily a U.S. North American player, but U.S. is the market that media tends to follow.

Roku controls about 44% of streaming television viewing through big screen television sets begins through a Roku. To put that in context, which I go into the piece, you won't find this in the financials. That's about three 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 let's just bask in what we have here. You have Fox, who I've argued for a while on accrued interest, that Fox is the smartest, they have the smartest corporate management team when it comes doing large-scale M&A. And the biggest evidence point I have of that was they got out,

they won the streaming race basically by not really playing. A little bit similar to how Sony did. So for all your viewers and listeners, back in 2019, Fox closed on the transformational sale of effectively almost all of their 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. Now, we're going to come back to this, but this portfolio of local stations is incredibly powerful because it's effectively all the top 15 markets. Okay? So, yes, they don't control the second and third tier markets, which is more on the first,

of a next star, which I've been bearish on, but through their local market stations, 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 entertainment channel. They kept Fox Sports One, their sports properties, and they use that as a new base to grow. Now, seven years later, they do this big deal, which Fox is basically buying distribution. With this one deal, they immediately become a huge player in digital distribution. They get through Roku access 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, you know, outside the U.S. And I think what is incredible about this is that Roku, which I think many value investors have not paid a lot of attention to, because, well, candidly, the earnings, it screens expensive, all right? They had a lot of cash-heavy investments spent for years building up their 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 years, Roku has really shown themselves to be a platform, a major platform, a new aggregator, you can call it, of both fast, free, as-supported streaming television, and they become an aggregator, sort of a re-bundler of all the different many, you know, Avod that stands for video, advertising video on demand or subscription video of demand, all the movie services, you can get that all bundled through your Roku, and they present to you as, as one.

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 it 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. No, that's great.

That's great overview. And look, I'll have quite a bit of pushback, actually. Of course, yeah. I do think one thing that's interesting here is, you know, and you've got it in your piece, I did not realize the history, the long history of this, but Roku relaunches their homepage about a month ago, right? And if you followed Netflix over the past 10, 15 years,

there was always this line that stood up to me. What's the most valuable space in media? And everyone's the, it's the Netflix homepage, right? because you could put literally anything up there, any TV show, any movie. If you put it on the Netflix homepage, it was going to be a top 10 property in the entire United States or in the entire world, really, right? And Roku's got a little bit of that. They've got that Netflix, that Roku homepage.

And I was reading an article now, I'm sure they were in deal talks at this point, but I was reading a transcript from early June where the, the CFO of Roku is talking. He says, hey, we launched this homepage and, you know, we instantly were signed up all these partners. The first part they mentioned is Fox, but then they mentioned Comcast and then they mentioned Netflix. You know, it's not lost to me. They redesigned the homepage and then instantly they're for sale. And I wouldn't be surprised if they went to all the potential bidders. You know, I'm sure Comcast was in there. I'm sure there were several others. It said, look at the results you're seeing on this homepage and imagine if you control this.

This is your one opportunity to get the Netflix homepage that you've always wanted, right? You load it on, you've got a new show. 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 rip on it a little bit further, your article, I did not realize this, but you talk about, hey, Anthony, the CEO, the founder, the 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 TV out there. And he really had to be pulled there. And 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, all this sort of stuff. And no, no, no, no, no. no, right? He's an entrepreneur. He can do that. And maybe he had a long-term vision, but I bet you Fox looks is this and they say, hey, we see the internals 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 like for the strategic logic, that was something really jumping out to me. I think everything you said there is incredibly relevant. So for your listeners and for your viewers, in my second article, I'll probably do a third, but for the second one, it was all about,

I was giving people a history that you didn't realize had happened of the ways that Roku had done some self-help to improve themselves. My personal philosophy is, 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

that, you know, the head honcho up top can set the direction. And oftentimes, and in my piece, I want to give proper credit in an article I did, I cited a deep dive from last July. Okay, so this was July 2025. My piece, about half the piece was focusing on this article from the information, where it was all about the education of Anthony Wood. And basically how he had to be forced to do some of the, basic blocking tackling when it comes to media ad sales.

Now, my first reaction was this is crazy if this wasn't done before, all right? So we get pause on that. But, you know, stock prices are about the future and not the past. So now that we're here, what was information due? Well, on the crude interest, I try really hard to bring to your attention the strategic things that are not on the spreadsheet or not in the financials. And one thing that executives don't do, and I know is from working with them, is that they don't 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, you know, 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? Now, very recently, they started adding a few buttons or tiles that are for you. Oh, excuse me.

I misspoke. The only example they had done of this before was they used to sell, and I guess they still do. They sell quick access buttons on the Roku brand of remote. So if you want to pay up for that real estate. And I also mentioned 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. Well, the competition changed for Roku. I think I'm not sure what was the one bell or the one idea light bulb that popped over the CEO's head to say, well, why now?

I think it was probably several. I think, yes, you have a tremendous opportunity in having the unlock of the home. page. I would say here, what's really amazing about this is how much this was just completely wasted inventory. And let's just move off of the homepage. There are some other basic ABCs of ad sales that they didn't. This is ugly. There's probably something 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. And that's crazy. That is absolutely crazy. Turning money. The thought process was he thought that he was keeping the platform clean and visually

pure. His thought was, well, you would be less than convenience by getting ads from other TV shows than you would for, you know, QSR or, you know, all-state 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, the biggest advertisers in local television are typically auto, auto dealerships, for example, okay, somebody had never would have been up there before. So, yeah, suffice to say, a lot of low-hanging fruit that I think you wouldn't realize that when you look at the purchase multiple, because on paper it looked like, you know, a little bit expensive.

I don't have my numbers in front of me, but I want to say that Fox was buying Roku, I think, at the enterprise value of $22 billion, I'm sorry, 22 times, I believe enterprise value to Ibeda or something like that. But if you actually look below the surface, because the ad revenue is just beginning to inflect, okay, if you use management's estimate of about a billion dollars in free cash flow in 2028, they actually purchased there about 22 times EV to free cash flow.

And if you added some light synergies, that drops into about 16, 17 times EBITA 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 their media properties and just feature them on the homepage. They can drive more signups to Fox One.

They can drive more signups to Tobe. They have a lot of sports shows. One thing I think that I'm getting into the future piece is that with Disney assuming full control of Hulu, okay, and Hulu is about to be rolled into the Disney Plus app, right now, there really isn't much of a neutral switch in third-party space where you can operate if you're a streaming provider.

So I think why now we'll never know for sure, but I think there's a lot of big changes that are coming that Roku said, hey, look, a lot of things are changing in the next two or three years. Let's partner now and we can drive where this industry is going. Well, let me question. So 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 the deal was announced to, as you and I are taping under 45. So let's just say it's less 25% of its value in two weeks in a flat rising market. It is, you know, I've got some of the loose comps over here. They are, where's my little loose comps? You know, Disney is up about 1% in the same time. So this is purely a.

Oh my God. And now there is something of shareholders thought in Fox. They had like a pure play, capital return. Right. Back of the stream. 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, again, even if you see a lot of the upside of the Roku platform, that's available to everyone.

They're paying $22 billion. So they kind of, you know, you're sitting there and saying the winner's code, curse. I think this was obviously very well shot. And they're coming out and saying, hey, a $22 billion deal, $400 million. of cost energies. And you kind of look at that and you 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 shaped the high level. I'll toss that just kind of skepticism of, hey, big premium, low cost energies, well-shot deal. I'll just toss all that over Q for what is the market missing. Sure. So I understand the market's reaction.

You know, 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. M&A, you generally, all the value goes to the seller and not the buyer. And that's MNA in general, but media MNA is like on steroids,

all the value going to the seller. Especially, exactly, especially in media M&A. And media M&A has a whole history of candidly 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 into my archives and explaining, look, Fox is the most long term of all these people. I don't have the final piece 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, on accrued interest, 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 they're 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 not. unrepresentative because frankly, they spend so much money that they're not going to spend going forward on building up their platform. So the margins are already inflecting. And the investors are not

going to give her credit going forward. I also think, too, investors in media also 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 they 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 VersaSit articles that I want to bring up as Viacom. Okay, this is the old Viacom before the Ellison's got involved, all right? For a decade, before I was in business school, while I was in business school, you guys, I don't have to name names, all right? I picked on David Ironhorn. I'm not going to pick on anybody else. A lot of investors for a decade, famous people, you know, came out and said

Viacom was smart because they're pure play. They're not doing this or not doing that, all the money is going to buybacks. The risk here, I think, is that I think the risk is not that the stock dips for a quarter for a year. I think the risk is that you find the company permanently impaired, you know, and the earnings are permanently impaired, and they can't grow. And then in two or three years, when you realize that it's too late, then you have to start getting desperate, and then you have to start, you know, doing these deals that are real hellmeries, which is effectively what CBS got with Paramount.

Something else I think Fox shareholders, whether or not they realize or not, need to just have an honest, hard look in the mirror, is that 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 in Fox over the last quarter, I would say, I've come from analysts and reporters have been saying, look, NFL rights are getting more expensive. Everyone knows I don't have to tell you. And they say, look, Fox's is the smallest of the big four networks without a big brother or, you know, a parent company who can help fund this increasing arms rates for sports rights. This deal is not necessarily about sports rights. But

you need to be clear. Fox is on the island. Fox is 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. And then I also thing too here, look, I actually think it was great that Fox used about 60% cash for this deal. Okay? So 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. And I think in 2027, 2028, numbers are going to make a lot more sense.

And revenue synergies never get discussed in these deals and for the right reason. So 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 Brothers situation, where there you had two content providers who were combining. here you have a major content provider who's taking over distribution. And then one thing I would give a little preview, and I'll pause here for a second, is that here's a preview of some future articles I have. I want to do more strategy pieces, and I want to tell, well, Fox shareholders,

if you're listening, and for everyone else out there, let's look at what all the other streamers are doing, who are not Netflix, Paramount, and YouTube, okay? about a month or two ago, Roku struck a deal with the CW network. CW network is, you call the fifth broadcast network, a distant fifth,

owned by Next Star, where I'm Bereshawn, okay? So Next Star came to C2, Next Star which owned CW came to Roku and said, Hey, Roku, let's strike a deal where Roku becomes the streaming home for our shows. Okay?

Next Star, CW then took their sports content, and they went to ESPN, ESPN Plus, and said ESPN Plus, why don't you be the streaming home for our sports? Okay? So you have more and more of the re-bundling, the consolidation that's happening. And I think it's not clear today. Today it looks fine,

but you're going to wake up in 2027 and certainly 2028, where everyone else is going to be partnered up. And Fox now, I would say, I would pause on this moment, Fox through this, And this is bigger than money. Fox no longer is tied to the cable bundle. Fox, I'm sorry?

No, let me just ask you a different way. Sure. I think you, if I'm just listening, I think you are really bullish on Roku, and I think you have respect for Fox's management team. And, you know, they did sell like at the top in 2019. Now, I would push back and say, hey, they probably could have shopped that better

because if Comcasts couldn't come with a hassle offer, it would kind of prove up they sold 40% too cheaply, right? But they did sell a kind of opportune time there. I think you think they think long term strategically, and I think you're bullish Roku. And I think 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 box. Like, anyone could have got, and it's also the revenue synergies, it just isn't clear to me that you put Fox and you say, 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? And we just, anyone can bid. It's Netflix. And they're always just tearing each other up, kind of like the top bidder on a Google search words, right? Like, Google doesn't need to own GEICO to have the insurance premiums, the insurance bidding words would go way up. They're happy to work with anyone. So I think you're really bullish.

Roku, I'm not sure if you're bullish, like, the, And I think because you're really bullish to steal, you're bullish the price. I'm with you like 22 times two-year-out free cash flow for a growing platform that takes 50% of streaming. That actually kind of seems cheap to me, particularly when there are all these levers as you point out to pull. But I'm not seeing the bullishness on the Fox Roku, if that makes sense. Sure, yeah. No, I think that's a great segue. So let's talk a little bit more about what Fox can do with this.

Okay. So there's two things that I think. One, I think, is how they could grow their platform. We'll get to that in the second. But I really just want to stay on. A big theme that I've been driving home to my subscribers is that I think investors are still underestimating cord cutting. Okay?

So that's just an observation belief in mind. I think that what this does for Fox in the short term is that it helps them stem the bleeding. Because here's how I sort of look at it. Fox, along with all the other networks, have a situation where cord cutting is happening and the profits from linear are decoucings. I don't, we don't have to, you know, argue that again, okay?

Here's what's relevant. So, and I'll just go in order. So NBC has Peacock, right? And if you do a deep dive on Comcast, you'll see that they're spending a tremendous amount of money to deprop up peacock and sports rights and a whole lot of other things. It's very, very expensive. The Olympics, the Super Bowl, a wildcard game. It's the new NBA pack.

I mean, my God. No, 100%. And, you know, just very quickly, Paramount Skydance is spending a whole lot of money to prop up, excuse me, Paramount Plus. They're 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 that there's a tremendous cost to streaming that often gets overlooked. The Fox is not going to have to do 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, the increase in the negotiating leverage.

The negotiating leverage that Fox has for every future distribution deal goes up because their BATNA, their best alternative on accrued interest, I argued, you threw out Disney how, yes, Fox has underperformed Disney over over this, this period. But I read Disney underperforming at the beginning of the year or

at the end of the last year. It's, it's been stuck around $100 for how many years. You know, Disney is sort of the poster child of it never looks that bad. It never looks that bad. But oh my God, we've been underperforming the market for 10 years, all right? But Bob Iger is really cool. He's well liked. So people never put his feet to the fire. But we'll see if happens with the other guy. So I think that I am bullish Fox because this will this will help them get better deal terms than they would have gotten without it. I think that what people don't, why I think investors also forget is that the number one distributor for paid TV channels is YouTube TV. All right? That happened last year. And something I talked about in while I was on and perform

is that people don't realize how much of a bloody nose, a black eye, that you, YouTube TV gave when they punched Disney right in the mouth last year. They had a very bitter carriage dispute where they dropped Disney and they said, we don't care if we miss NFL games. And then, and they won. And Disney came back on their own terms. Disney was forced. And this is something, too, that investors don't appreciate because it's not in your

face. But YouTube TV forced Disney to give the premium sports that Disney bought for their streaming service to all of YouTube subscribers. Okay? I think that's a consequence that's going to have huge ramifications down the road. So you have all these other competitors who are burning cash on their streamers and are going to keep burning cash on their streamers because YouTube's going to say, oh, no, no, all that free stuff you gave, give us that too.

So Fox never got in that race. They're never going to have to get into the race. They're never going to have YouTube. YouTube's never going to be able to. pull this with Fox. Because you're going to say, okay, we'll go around you. All right.

So you have all that. I think that's huge, while I'm bullish for Fox. This is a little preview of my next pieces, but the Fox piece down the most bullish on doesn't even have Fox's name on and that's called Tooby. I was surprised in this merger

agreement. One of the first things, I haven't read the merger agreement since two nights ago. But if I remember the call and I remember the merger announcement, they say to be right at front, right? Tube and Ruby and Roeke. And Toobie, for those who don't know, is I think it's the largest free ad-supported streaming

service out there. Fox bought it for like 400 million-ish in 2020. And I was surprised they were out here saying, hey, you know, a big piece of this deal logic is the To Be Roku combo. Because again, if I'm, I'll just leave with the bearish and then I'll turn it over to you. If I'm bearish, I'm saying, hey, 2B plus Roku, any fast channel can just pay Roku right now. Roku can be switching. Every fast channel can pay.

And Roku, by the way, has built off, what is it? It's howdy and friendly. They were kind of starting their own internal things. So I look at that. I say, you know, Fox 400 million. Like, I think a lot of people were bearish to be because, hey, yes, I think it was growing quickly. But Fox was putting a lot of that as you're kind of looting with the Disney content.

And as Charter has said about all the ads. Like, hey, if Fox invests a lot into content and then pumps it through Tooby, yes, Tubey grows quickly. but it's not, it's kind of like getting subsidized by everything else, right? So it's interesting you bring that up because I picked up on that too. And I wonder if that's box doubling down on a strategy where, okay, like, we're making all this investment elsewhere and Tube grows quickly and we think that's awesome. But without that investment that generated huge losses elsewhere, it kind of wouldn't be

growing quickly. And it's like kind of non-economic growth, if that makes sense. So I threw a lot out there. I'll toss it back over to you. Sure. So as you mentioned, Tobe, it's. It's not Fox brand. It's never been Fox branded.

On accrued interests on my site, I would cover a lot of the Nielsen monthly TV viewing reports. And this is, it's a very imperfect guide before anyone argues with me in the comments. I know Nielsen, yada, yada, yada, yes, we know the measurement is not perfect. But what's important is the trend. And one thing I was covering for a while, actually, before this deal happened, about two weeks, before this deal happen. I wrote an article saying I'm dropping coverage of Fubo TV to cover Roku and in other articles I talk more about Tubey. So one thing I think is really important is that so Tubey and the Roku channel are very complimentary in ways that aren't very obvious. So for any

your listeners or viewers who have not watched Tubi, please go sign up, give it a look. It's for free. Tobee, I think, has become a destination where a lot of other media companies have been putting their library content while they've been taking it off of their own, excuse me, their own streaming content. For example, when Warner Brothers was trying to save money and they took off a lot of their old shows that they have paid residuals on, you know, they're taking their stuff off HBO Max. And people were complaining, I mean, it's not like they're watching them anyway, but they were complaining, well, they quietly put those shows on Tooby. So I think if you go there, you'll be very happy.

Tube has about 100 million monthly active accounts, which I think is crazy that people don't realize. In terms of television viewing, Tobe, I think, has about somewhere between 2% and 3% of big screen television viewing, almost equal with Prime Video. If you combine, again, lots of asterisk, but if you combine the online viewing between the Roku channel and Tooby and the other Fox properties, it's about equal to Disney.

In my first piece, I had an interesting slide where they basically showed how their combined reach is now equal to Disney, even after they sold Disney all their networks a long time ago. So here's how the To Be Roku combination works. So in the piece, in the conference call, excuse me, they go through some of the math. About 100 million households,

there's about a one-third overlap between the two audience. If you de-duplicate, de-dupe, okay? So if you separate those, if you combine them, if you're an advertiser, they said they were not going to combine the services and I believe them. I believe them. But they will be selling them together.

I have no doubt. So I try to stay away from TLA's three-letter acronyms, the jargon, but think of Tobe as a major leader in free on-demand streaming, okay? It's a little Netflix-like, a little bit, but you pick the square,

all right? They don't do the sit-back, linear style, it's just going to keep playing. They don't do that, all right? Now, the Roku channel, almost all of it, is linear style streaming television.

vision, okay? So you basically have the A-Bod, advertising, and the S-Vod, and you combine them, and you triple the reach, you have a very powerful tool that you can now sell a whole lot more a digital revenue. And 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, they have their whole menu, and they'll need to have Fox on the brand. So they can, 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. So I think the combinations for Tubi are really tremendous for any listeners.

Fox put the Super Bowl on Tubi for the first time two years ago. Okay? It's very possible next time when Fox gets a Super Bowl, the broadcast networks rotate. They take turns once every three to four years. you can have a Super Bowl on Roku and Tubey and linear. So I'm bullish on Fox through Tubby and through the rest of Fox to answer your question. Let me ask one more question. You mentioned earlier, hey, I mean, I think everyone always thought Roku the end game was a sale, right?

I was actually asked, I think it was Rich Greenfield asset on the earnings call. Why now? So I ask you the same question. You know, why now? Because I understand from a seller's process, as I mentioned at the beginning, they relaunched the home page. I think there's still lots of letters, and I think they can go to, I think all the, sorry, I understand from a buyer's perspective. I think all the buyers looked and saw the home page and said, oh, look at this lever, this lever, this lever. So to some extent, as a seller, you're loving

the buyer paint their own picture. But, you know, also as the, as an entrepreneur who's built this, like, I'd have to think that homepage and a lot of where the industry is growing is really exciting. And, you know, you choose to sell now. You didn't choose to sell two years from now when that home page is really growing. You didn't sell, you know, as the media landscape continues to all, you chose right now. Why do you think they chose right now? I think they chose now because I think the shift in market share, I'm sorry, I think the shift in in marketing ad, 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 two began to go from less than 50% streaming to majority 50% streaming.

I think that's a shift that it feels that we've been talking about core 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 following the space to think, oh, this is old news. But it really, it really hasn't been. I know Nielsen in their chart over there, again, lots of asterisk, but over the last year, over the last like quarter or two is the first time we're streaming, viewing on big screen, actually went higher than linear. So I think probably why now is that, well, we're at that inflection point.

Also, too, the number of buyers is shrinking. It just objectively is. Okay. So yes, from a pure, you know, high price standpoint, yeah, they probably should have, you know, sold for more when there are more companies in the race. But I think they had a very motivated buyer, all right? It didn't take a whole lot of debt. I think, you know, people really underestimate just how lucky

Warner Brothers got, frankly, in having a Paramount come and being willing to spend effectively anything to buy them. There are many buyers out there like that. And you are right, but the history of media, and Roku is more distribution than media, but you are right, but the history of media is there is always one, right? Whether it's the Japanese conglomerates in the 80s

or Coke in the 80s and the 90s, these, you know, summer redstone, there's always one. So I hear you, but I think when you hung up the four 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. You know, one thing I have been thinking about with Roku, and again, I think about the intentions and stuff all the time. I think I might be telling myself a story, but I have been wondering, If they were starting to, as you said, I think you hit the nail spot on, 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 at the table. Amazon's out of the cards. Amazon five years ago, probably 10 years ago, would have been a natural buyer. Antitrust that ain't happening anymore. So you were starting to see his shrinking pool, so I think he hit the nail on head. The thing I have wondered is, AI is coming. And this might help us, which I want to quickly at Google and met all those.

I was reading something from YouTube CEO to PrEP. And he was talking about AI slop. And he said, look, we try to keep AI slop off. But if you had asked us, you know, 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 a, you know, 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 kind of looked and said, hey, the AI videos are not there yet, but YouTube, core YouTube, not YouTube TV, core YouTube, Instagram, wherever you're getting AI videos, that's going to get a lot more attention. And maybe the media distribution, you know, maybe it just gets a little less valuable

because there is a limit on human time. And if more time is getting spent on AI videos and watching them wherever you're watching them, and that's genera not E Roku, less times on Roku. So maybe they were kind of looking at that too and saying, hey, is there a tail risk emerging? So regarding the prevalence of AI videos, I think that's a very good point that you raised. I know, I mean, just from watching how people consume YouTube, there's a whole lot of, you know, AI content there, particularly for children's content, particularly for like the younger viewers. They don't care as much if, frankly, if there's a story or the high production value.

So I definitely hear you on that. I think in some ways to me, I think the proliferation of AI content just makes distribution or controlling distribution all that more important. Because to me, you know, as we have more AI content, you're just fragmenting the Media Pie even more, okay? Because these AI videos are productions, they're not coming from Disney. They're not coming from the big studios. These are mostly newer players, a lot of them overseas.

And the reason that they've been able to be so successful is that primarily through releasing them through YouTube, excuse me, 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 need 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. And I've seen this on Disney Plus as well. You think you're just going to be seeing more user-generated content get 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, I think this also is not as well, In my article, I mentioned how a lot of us, I'm an older millennial, some of your listeners might be too. A lot of us still think of streaming as going through the dongles, to going through the sticks, or through your Apple TV box, 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, you know, we didn't talk about Walmart yet, but Walmart's a big player. that is also behind the scenes because when Walmart bought Vizio, the television maker, what Walmart was basically doing, is they're basically saying, hey, look, we want to get access to this streaming video at inventory

for lots of reasons, but also to pair it with our first party sales data for your listeners and for your viewers. The holy grail in marketing and advertising, 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 video is getting a whole lot more ad dollars without having any big hits. Okay? So I think Roku to answer the question. Without having any big hits, maybe reach your, my God, it is the worst service. The bull case for Lionsgate is, yeah, Amazon messed up with MGM, but my God, could they need something? Yeah, yeah. But like, you know, once you look behind outside the hits, it's like, okay. if you have more of the ad inventories being controlled by who controls the operating system,

I think you have Roku's basically saying, look, as a distributor, we're better ahead than media companies, but now we're competing with Samsung. We're competing with fire. We're competing with LG and 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, you know, more fragmentation is only going to make who controls the pipes even more important. So if you can be someone who's re-bundling, I think one of the smartest things Roku has is that Roku is basically, I ain't put this in a piece, but there's some ways like the new TV guide, they're the one service where you can pull them up. And you can ask, hey, where is this piece of content? And it'll show you every service that has it and give you like a one-click like drop-down.

So I actually think with AI as there's more AI content that's coming, then yeah, you're going to want to control the pipes because people don't care, you know, who makes it. They'll watch it anywhere. Let me hit you with a gotcha question, but in a fun way. You know, we talked about how you're bullish on Roku like controlling the distribution. and I just mentioned AI, and you're bullish on more AI generation, all that sort of stuff. And the reason this is fun one is a lot of what you said,

if I replace Roku for Spotify, I think a lot of what you said there 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, lovers, goes away. And the reason I mentioned Spotify is I was just looking, through my notes and flipping through some other stuff.

And you have an underperform on Spotify, right? So the reason it's fun, gotcha. It's hard for me to marry your huge bullishness on the Roku platform with the bearishness you have on the Spotify platform. So just wanted to try to mend those two pences. Yeah, sure. Yeah, I can thread that needle easily. I tell my crude interest subscriber is upfront.

I am very bearish on audio. So the difference is, is 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 red piece and so am most subscribed piece, I called the Pokemon Theory of media investing. And aside from being excused to make a lot of Pokemon 16-bit game boy graphics with lots of different companies, I argued your immediate type, just like you have a water Pokemon, fire Pokemon, your media type,

whether or not you're audio first, your video first, are you display first, it matters what you can then evolve into. And my issue, and I've written about Roku, I'll be writing about it more. My issue with Roku, I'm sorry, Spotify, Spotify being audio first is that there's always going to be a ceiling on Arpoo. I mean, I'll just get straight to the, you know,

there's been so much talk about the cost of the labels, which I get. A fun fact that when people realize, that the labels, when they redid their deals with Spotify, they actually give Spotify, they give Spotify cheaper royalty rates, the more subscribers they actually sign up. So I don't think the relationship is as antagonistic as people think. But yeah, I actually am a little bit bearish on AI music. I think that music's a little different, again, because audio is a little bit different.

But all my personal taste aside, the issue with Spotify is I think they're always going to have a trouble raising our poo because the CPM, the cost of people willing to pay for an audio advertisement is always going to be lower. It's going to grow more slowly. And because music, especially music, is the same on all the services. You know, you have some exclusive, you have less exclusive video than you used to. But there's some things you can only get on certain streaming providers. But, you know, 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, the YouTube, or the other video bucket. So we can talk more about Spotify, 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. And, you know, a lot of good experimentation going on there. But that's my issue. It's the lack of ad volume. Look, I asked that on a lark because I looked at it and I'm familiar Spotify. I was just trying to marry the two. I mean, obviously audio 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.

Definitely hear you on the video. But, you know, that is a company that has kind of killed the doubters time and time again. And as somebody who probably listens to Spot 5 for 14 hours a day, because I've always got them on, I listen to my Final Fantasy Lo-Fi remix while I'm working a lot or everything. So just started that. Let me go quickly. We've got about five 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.

You know, the one area, you and I have traded a few notes on Google and meta. I think we've traded a few notes offline and everything. Markets are pretty skeptical. I think Google, it's hard talking about these too because, you know, Google, are we talking about their AI? Are we talking about YouTube? Are we talking about core search? Are we talking about Waymore? Are we talking about the SpaceX investment?

Meta a little bit more direct, but just like I think you, if I remember, you've got strong buys on both. You know, meta is just, let's just focus on that action. It's very interesting to me because meta, I mean, it is a big Trump company, 1.5 trillion valuation. but like the core business is doing great. And it's interesting where everything AI is spiking like crazy, except for the MAG 7's AI efforts, right? Microsoft's down years today, meta's down years today, Amazon's flat year today,

Google the shines coming off and people are saying, oh my God, this cap X, and you look micron to the moon, and it's the moon. And 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 rates. If they can't raise anymore,

they're going to stop shutting these down. And I would just point out one last thing on meta. Sorry to ramble. You know, they have their lab, which you can tell me if I'm wrong. It's probably the fourth best lab behind Anthropic, Open AI, and Google. So probably the fourth best AI. You know, I look at it to say, if you add back the reality labs, you're buying core meta at maybe 11 times, like actually after stock operating profit for a business growth 20%.

And what is meta labs worth? It's the fourth best lab. I don't know. SpaceX bought X-A-I for $2.50. Is it worth more than that? It just goes crazy. So I'm just rambling because I am fascinated by him. I'll just throw it over to you for the last few minutes.

Sure. So look, one thing is being exciting for me. I just turned 40. You're an old man, my friend. You're an old man. I just turned 38. And I pity you and your creaky joints. Us elder millennials.

So I literally grew up with Meta, who 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 the true value stocks in that, and I'll throw Netflix in here, although I'm going to keep it to Google and meta. They're true value stocks in that the cash flow, the earnings are there. They're strong and growing substantially. and they're perennially doubted. They're perennally doubted,

and you're seeing the multiples contract. What do I think about it? I think I'm, again, glad that I don't have a subscription service that gives, I don't pitch stock options. So the timing, the timing is unsure. I have a note that I just look back to myself that 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. So let me be a little more concrete. I get the skepticism on both companies. I think that the skepticism are 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, and I can say this is, this is unquivably true, Rivia, 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 AIs helping them deliver ads more effectively. Pricing is also staying strong.

So I think both of these companies, I think, I want to be on the record of going along 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 re-rate. I think something that people, and this might be a benefit. I don't have a fancy word for this. This might be in a future article, but I think there's something about being a conglomerate. You talk about the conglomerate discount. I think there's a complexity discount where I think a lot of investors tend to think about one aspect of the company and not the

other. Okay. So I'll say very quickly on meta. I think the biggest, underappreciated aspect in meta are their enterprise tools? Meta just announced they're selling subscriptions for Instagram, WhatsApp, a lot of the other services. I think meta has a line of sight to billions of dollars, 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. I think meta is just really fascinating. Look, we're about to have the second Blockbuster Sorkin movie released on meta this year.

Like, I'm not breaking new grounds, it's fascinating. But I think it is fast. You think back to 2022 when meta stock, you know, bottoms at under $100 per share. And people think Zuck is going to light everything on fire for the Metavers, right? What they rename Metaverse, right? and they go through the year of efficiency and the stocks at all time, it's high.

And now you have people, you know, maybe eight months ago, people are saying, spend everything on catbacks. And now people are really questioning. I do think meta is just such a fascinating case study in, hey, is Zuck's long-term vision worth it? Or would the company be better without voting control shares? And, you know, you mentioned conglomerate. And that's right where I was going because would this be better if you had the core meta business,

right, which is Facebook, WhatsApp, Instagram? if you had those separate and off to the side, and then you had like spun out as a standalone separate company that needed to justify its own spending, that needed to go raise money, all this sort of stuff, the all of the, forget the metaverse of, the reality, all the AI stuff. I do think that's interesting because you read the information articles and there's lots of leaks that the employees that, you know,

core Facebook feel like second-class citizens. They look at the big bonuses that the AI researchers are getting. They look at how they're being forced to do everything. It's just a really fascinating case study, the founder control structure with a visionary versus, hey, would these be better and you get the discounted and they're about to go raise equity? Guess what? If your equity is discounted and you're raising equity, that's maybe it's still a good ROI, but it's going to be a lot worse for your shareholders. It's just, it's just fascinating stuff, man. Hey, I'm going to have to wrap up in one

minute, but I just, there's so much more we can talk about. I had a great time chatting. Any last quick thoughts you want to hit or anything? Sure, yeah. No, I just want to thank you for the time. Dude, you're coming on, Gordon. We're going to get you the shirt. Absolutely. No, thank you. No, yeah, no.

I just want to thank you for the time. And for all your listeners, subscribers, please check out Accrued interest. I'm on Substack. Or you can go to www. accruedint.com. I'm on all the socials. X, threads, not blue sky, but everything else, but that.

And, yeah, look, I'm going to stick to value investing. I'm going to telling you what companies are growing their earnings power. and the market might disagree in the short term, but I'm going to still keep focusing on earnings. And I think that if we focus on that, I think decisions we make today will look a lot smarter in 2027 and 2028. And that is sort of my North Star.

You're giving me some hope for my life. Look, the only thing I'd ask that is you don't even need to go type it into your browser. You can just all have a link to accrued interest in the show notes. And probably just because it was just released the second Roku piece, which you can then use to find the first piece. and subscribe so you get the third piece that Simeon was talking about all through this thing. So, Simian, this is great. That's our Q2 media checkup, focus on Roku, but we'll definitely have you back on for Q3.

We'll talk to you, buddy. Thank you, Andrew. A quick disclaimer, nothing on this podcast should be considered investment advice. Guests or the hosts may have positions in any of the stocks mentioned during this podcast. Please do your own work and consult a financial advisor. Thanks.