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Why Roku Stock Was Streaming Higher on Wednesday

By Danny Vena – Dec 8, 2021 at 12:38PM

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The streaming video platform inked an important deal.

What happened

Shares of Roku (ROKU -3.58%) charged sharply higher Wednesday, surging as much as 15.5%. As of 12:13 p.m. ET, the stock was up 14.3%.

The catalyst that drove the streaming giant higher was an announcement that it brought a high-profile streaming service back into the fold.

So what

Roku reached a long-term deal with Alphabet's (GOOGL -0.49%) (GOOG -0.57%) Google to keep the YouTube and YouTube TV apps on its platform. This was an important deal for both Roku, the leading streaming video platform, and YouTube, the second-most visited website globally. The terms of the agreement weren't disclosed.

Five young adults sitting lounging about a living room watching streaming on a laptop.

Image source: Getty Images.

The streaming pioneer announced the deal in a post on Twitter, saying, "Effective today, we have agreed to a multi-year extension with Google for YouTube and YouTube TV. This agreement represents a positive development for our shared customers, making both YouTube and YouTube TV available for all streamers on the Roku platform." 

This ends a very high-profile tiff between the pair, which erupted back in April as negotiations reached an impasse. The agreement was scheduled to expire later this week and the companies had been ramping up their rhetoric.

Roku had previously sent a notice to customers saying that negotiations had "broken down" and accusing Google of anticompetitive behavior. Among other complaints, Roku said the search giant was demanding that Roku prioritize YouTube in search results on its platform, while also requiring access to Roku's viewer data. 

The very public spat -- particularly the allegations of monopolistic behavior -- had attracted the attention of those on Capitol Hill, as lawmakers have already been seeking to rein in big tech companies, who they believe abuse their market power to dominate of competition. 

Now what

This was an important win for Roku, which could have experienced a high number of user defections with the loss of YouTube. Viewers have put down the remote to get out in recent months as pandemic-related restrictions have eased and investors have been concerned about Roku's slowing user growth, which will most likely prove temporary.

It also helps illustrate Roku's bargaining power, with more than 56 million viewers, which helped it go toe-to-toe with Google.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Danny Vena owns shares of Alphabet (A shares) and Roku. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Roku, and Twitter. The Motley Fool has a disclosure policy.

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