Fox has acquired the ad-supported streaming service Tubi in a $440 million cash deal.
Tubi will remain as a separate company, with founder and CEO Farhad Massoudi staying on. The deal is expected to close by the end of June.
Tubi offers a wide selection of free shows and movies; the service, if you head to its homepage currently, highlights “The Last Samurai,” “Daddy Day Care,” and Gordon Ramsay’s “Hell’s Kitchen” among its most popular selections. The San Francisco-based Tubi will serve as a landing spot for Fox’s content, as well as provide a large audience for it to advertise new shows. Fox said it may look to expand Tubi’s content offering my adding its local news and sports events.
In December, Tubi announced it had passed 25 million monthly active viewers.
“Tubi will immediately expand our direct-to-consumer audience and capabilities and will provide our advertising partners with more opportunities to reach audiences at scale,” said Fox Corp. CEO Lachlan Murdoch. “Importantly, coupled with the combined power of Fox’s existing networks, Tubi provides a substantial base from which we will drive long-term growth in the direct-to-consumer arena.”
Fox will finance the Tubi acquisition principally with the net proceeds from the completed sale of its stake in Roku, which Fox was an early investor in.
“Fox Corporation’s relationships with advertisers and distribution partners, combined with the company’s dominance in news and sports programming, will help Tubi continue to grow and differentiate itself in the high-growth ad-supported streaming marketplace,” said Massoudi. “I am proud of what the team has already accomplished here at Tubi and we couldn’t be more excited about joining such a fast-moving, entrepreneurial company. We look forward to working together with Fox to accelerate Tubi’s leadership position in the market and bring new competencies to Fox.”
Fox’s interest in Tubi comes as more entertainment giants have looked towards AVOD services as acquisition targets — even in an age where paid streaming services like Netflix and Disney+ continue to eat away at the old ad-supported TV business. Last year, ViacomCBS bought Pluto TV, a similar AVOD service to Tubi, for $340 million. Last month, Comcast bought Xumo, a service that offers 10,000 free movies and shows, as well 190 channels, including Fox Sports, ABC News, and channels dedicated to series like “Family Feud” and “Forensic Files.”
One reason these companies are in demand could be the fact the AVOD market is growing exponentially. Ad-revenue hit $3.8 billion last year, according to Magna Global estimates, marking a 39% increase from 2018, and in 2020, the industry is expected to increase another 31% to hit $5 billion in sales. It’s worth pointing out that’s still well short of the $70 billion advertisers spend on old school TV ads each year.
Sean Burch contributed to this report.