Is Roku being disingenuous about why Fox was removed?

Roku customers were in for a nasty surprise this week after learning several apps published by Fox Corp, including news and sports apps, would suddenly be unavailable on the service.

In a note sent to customers, Roku said affected Fox apps had been removed from the company’s Channel Store and would soon disappear from the home screens of customers who downloaded the apps. The apps affected included Fox Now, Fox News and Fox Sports (FX Now and National Geographic, two apps once distributed by Fox Corp, were not affected since those apps have been acquired by Disney).

The loss of the Fox Sports app was especially brutal for customers hoping to stream the Super Bowl, especially those with Ultra High Definition, or 4K, capable televisions. Fox Sports is streaming an “upscaled” version of Sunday’s game in 4K through its app for free.

A note sent to customers from Fox Corp said the company was “surprised” to learn Roku channels had been pulled. (Screen capture by The Desk)

Roku says its “agreement” with Fox Corp is to blame for the decision to remove the channels, though Fox Corp said it was “surprised” to learn Roku had removed the apps without notice. Roku countered back on Friday, saying there were other ways for users to watch the Super Bowl for free, including through the NFL’s own app, which remains on Roku (none of the alternatives posed by Roku contain the upscaled UHD/4K stream).

The situation seems a lot like what’s been playing out in the pay television industry for a while now: Cable and satellite companies like Comcast and AT&T have distribution agreements with programmers like Fox Corp and Disney to transmit channels like Fox Sports and ESPN on services like XFinity and DirecTV Now. When those agreements lapse, the companies have to forge new agreements with distributors. If distributors ask for more money in exchange for the rights to carry channels, companies often balk and there’s a brief period where customers are left without that programming.

The situation usually resolves itself when both sides reach an agreement, with terms almost never disclosed, though customers usually face a fee increase later on down the road.

The practice of “cordcutting” — dropping a traditional pay TV company for online streaming services — has largely been viewed as the antidote to carriage disputes and higher fees imposed by companies like Comcast and AT&T.

Roku is one of the bigger players in the spectrum, selling hardware that enables households to ditch cable and satellite for a never-ending swarm of streaming TV apps. It gained significant market share against its competitors — Apple, Amazon, Google and Nvidia — by positioning itself as an agnostic player in the space: Everyone can make an app for Roku, and lots of companies do, including those who sell similar hardware devices (Apple, one of the last holdouts, launched an Apple TV app on Roku late last year, making movies and TV Shows once purchased through iTunes available on non-Apple television hardware for the first time).

By positioning itself as an agnostic company, Roku has come off as inviting to online services and software creators when others have historically taken a hard stance against offering access to any service that might compete with a similar in-house offering. Only within the last few months have Apple TV hardware gained access to Spotify, a streaming service that competes with Apple Music. Amazon famously yanked Google’s YouTube app from its Amazon Fire TV devices over issues involving Amazon’s retail store and selling Google-made hardware like Nest thermostats.

Which makes the whole Fox situation curious: Roku says it must have a distribution agreement to carry Fox apps, making it sound like Roku’s business model has shifted drastically from an agnostic player into one that has to forge distribution agreements with content providers similar to the agreements made between cable companies and programmers — and even agreements between hardware and software competitors.

But hundreds of independent channel creators continue to publish their apps through Roku without any kind of traditional carriage agreement. So what is Roku talking about?

One in four households has access to Roku’s operating system, either through a Roku-made hardware device or integrated directly into a TV through a licensing agreement with third-party manufacturers (TCL is one of the biggest Roku manufacturing partners). It’s possible Roku has started leveraging this influence to encourage companies behind some of the biggest apps — think Netflix, Disney’s Hulu, Sony’s Crackle, Amazon’s Prime Video and others — to give the company one of two things: Money for continued distribution (which is unlikely, since others don’t have to pay to launch Roku apps) or access to viewer data.

That last element is incredibly important for Roku: In recent years, the company has shifted away from focusing on its hardware business as a means to generate revenue and looked more toward digital advertising. It includes limited advertisements on its home screen and also runs ads in free videos offered through The Roku Channel, the company’s own streaming service.

It’s possible Roku singles out bigger companies like Fox Corp with specific requirements that they continue to keep the floodgates of viewer data open to them, especially as bigger companies themselves look to silo off user data for their own initiatives.

In any case, the situation between Roku and Fox is problematic for consumers who thought streaming hardware and the Internet would help save them from carriage disputes that have become all too common in cable. The thought that Roku isn’t as insulated from carriage disputes is depressing, but not as much as the thought that this may be an issue invented entirely by Roku.