Fox Corp. has acquired the streaming service Tubi TV for $440 million while selling a 5% stake in the streaming platform Roku. The company used the proceeds to help finance the acquisition.
Tubi is an American streaming service based in San Francisco, California, United States. The service launched in 2014. It is a free, ad-supported service, with advertisements shown during unskippable commercial breaks during programming.
The service, partnering with premium studios and networks, provides people with thousands of films and TV shows. Additionally, the streaming service currently has 25 million users. Fox Corp., which is not a part of 21st Century Fox (which, again, became a part of Disney in 2019), did not have its own streaming platform.
Tubi primarily streams non-exclusive licensed TV shows and movies and will operate as an independent subsidiary of Fox. Moreover, Tubi founder and CEO Farhad Massoudi will continue to lead the service. Apart from the $440 million, Fox may also owe $50 million in deferred considerations and unvested options over a three-year period.
However, Fox is not planning to offer original content through its association with Tubi. Rather, the company has said that it will evaluate opportunities to expand the Tubi offering and bring national and local news as well as sports programs. Apart from this, it will also use the streamer to push its advertising business.
Fox will, however, offer a large number of its older TV shows and movies for free to its subscribers. Thus, Tubi is not getting into the streaming wars with the likes of Disney+, Netflix, Apple TV Plus, or Hulu by bringing in original content.
Among the many ways a streaming service can make money, one of them is by not charging customers at all. This is often referred to as the AVOD model, where the content is free and revenue is generated primarily by ads. This is how Tubi earns its revenue as well and which has proved fruitful for the streaming company.
The ad-supported video streaming market saw a 38% growth in revenue between 2018 and now and this number is only expected to increase. Thus it is a good market to be in. Fox’s acquisition of Tubi is the latest move by big media companies to buy their way into the streaming market. Comcast bought the Xumo last month, while Viacom bought Pluto TV last year.
Viacom CEO Bob Bakish told investors last month that Pluto TV touts more than 22 million monthly users. That’s a growth of 75% year over year. In the midst of growing its streaming footprint, Viacom can really profit from having a free, ad-supported service like Pluto TV. On top of this, Bakish expects the number of users to hit 30 million by December 2020. Similarly, Comcast sees Xumo as a good asset to have in the streaming war – the service has 5.5 million active monthly users.