Fox Corporation bought itself a piece of the free ad-supported video on demand (AVOD) action earlier this week with its $440 million acquisition of Tubi.
The deal follows Comcast’s acquisition of Xumo in February, reportedly for around $100 million, and Viacom’s (now ViacomCBS’s) $340 million purchase of Pluto TV early last year. There are now no independent AVOD players providing ad-supported linear-like viewing experiences left on the scene with any significant market share.
The Tubi and Xumo acquisitions validate Viacom’s vision and the AVOD opportunity overall, Pluto TV CEO Tom Ryan told AdExchanger.
But what exactly are networks getting out of the hundreds of millions of dollars they’re spending to buy AVOD assets? Diversification and access to new audiences are at the top of the list.
“Through these acquisitions, the networks are able to acquire and build a streaming audience, gain operating experience in the new environments and begin to deliver on advertisers’ goals through both linear and streaming inventory,” said Luke McGuinness, president of TVision Insights.
And putting aside the impact that the coronavirus crisis will have on TV ad spend, the upfronts and the amount of available TV ad inventory, it’s not a foregone conclusion that SVOD will inherit the earth. There’s a place for AVOD in the streaming diet, noted Terry Kawaja, CEO and founder of LUMA Partners, during a webinar earlier this week on Stream Wars.
“This narrative of a zero-sum game is ludicrous,” Kawaja said.
Here’s a rundown on the specifics behind why Fox, Comcast and ViacomCBS are grabbing onto AVOD with both hands.
With 25 million monthly users (MAU), Tubi’s user base is more than six times smaller than Netflix’s subscriber base. But Tubi gives Fox Corporation something it didn’t have before: a streaming platform of its own.
Fox’s goal with the Tubi deal, which Fox ironically (or appropriately) used the sale of its stake in Roku to finance, is to bolster the network’s long-term strategic initiatives related to broadening and enhancing its direct-to-consumer reach, engagement and advertising solutions.
The best way to think about this deal is as a hedge, an attempt by Fox to diversify its traditional linear offerings through investment and a way for Fox to compete for streaming audiences without having to enter the lion’s den of SVOD.
Fox’s plan is to continue running Tubi as an independent service while it evaluates how to expand the Tubi offering – but that plan doesn’t include plonking down a bunch of cash on original content.
The opportunity lies in combining Fox’s advertiser relationships and strong background in national and local news and sports programming with streaming distribution. (Not that there are any live sports to watch right now …)
Tubi is available on more than 25 digital platforms in the United States and has more than 20,000 TV shows and movies. [Related reading: a Q&A with Tubi CEO and founder, Farhad Massoudi, “Why Tubi WIll Never Have Originals Or A Subscription Tier.”]
The Xumo factor
When Comcast acquired Xumo in February, terms of the deal were not disclosed, but the motivation was clear: Take advantage of Xumo’s unique relationship with TV manufacturers.
Unlike other AVOD platforms, Xumo isn’t just an app. Although it’s smaller than its rivals at only around 10 million MAUs, Xumo comes preinstalled on numerous smart TVs, including LG, Panasonic, Philips, Sharp, Vizio and Hisense. Xumo also powers a video experience for T-Mobile and MetroPCS phones.
Comcast could take advantage of Xumo’s smart TV presence as a marketing vehicle for Comcast services, including Xfinity.
DTC is also a way for a cable company to build a more direct relationship with its existing subscribers, who often see their cable providers as large, faceless corporate monoliths that charge them too much for channels they don’t actually watch. (Cue cord cutting.)
“If someone changes cables providers, you still retain that relationship with a customer,” Xumo CEO Colin Petrie-Norris told AdExchanger during a previous interview about a month before the Comcast merger rumors became a reality.
Like Tubi, Xumo will continue to operate as an independent business under Comcast. It has more than 190 channels across digital and TV networks, including ABC News Live, NBC News NOW, History, PGA Tour, FREE Movies and Food52.
[Related reading: Xumo CEO On Acquisition Rumors And The Unique Challenges Of CTV Advertising.”]
Viacom’s $340 million acquisition of Pluto TV in January 2019 marked the first major acquisition of an AVOD platform by an old-school TV company.
When Viacom acquired Pluto, its user base was around 12 million MAUs, primarily on connected TVs. Monthly actives have since doubled to roughly 22 million, a number ViacomCBS CEO Bob Bakish expects will hit 30 million by December.
That’s a sizable – and largely new – audience that ViacomCBS can sell against and use as a distribution channel for its own library of content. And that's in addition to Pluto’s preexisting network of content partners, which include a wide range of movie studios and TV networks.
The ongoing strategy at Pluto, which now has more than 250 channels and remains an independent subsidiary under ViacomCBS, is to launch as many channels as it can as fast as it can – a something-for-everyone approach that’s similar to Netflix’s investment in boatloads of original content … but that doesn’t end up costing billions of dollars. Pluto TV also has content on-demand.
[Related reading: “Pluto TV Is Growing Like Gangbusters, And Here’s How.”]