February 9, 2021
Fox Corp. CEO Lachlan Murdoch has big plans for ad-supported VOD platform Tubi. The elder son of media icon Rupert Murdoch spent much time on Fox’s Feb. 9 second-quarter (ended Dec. 31, 2020) fiscal call discussing why Tubi will help transform the AVOD market out of the shadows of the Netflix-dominated SVOD ecosystem.
Fox in 2019 acquired San Francisco-based Tubi for $440 million, about a year after ViacomCBS acquired Los Angeles-based Pluto TV for $330 million. The platforms have energized an AVOD turf war that offers viewers free access to largely catalog content without a requisite subscription or registration.
Other AVOD platforms include Redbox Free Live TV, Shout! Factory TV, Crackle Plus, NBCUniversal’s Peacock, The Roku Channel, Amazon-owned IMDb TV and Fandango-owned Vudu. WarnerMedia’s HBO Max is launching an AVOD option later this year.
Last year, the number of OTT video services used per household per month rose to more than 7.2 in the United States, according to new data from London-based research firm Omdia. While the increase in online video usage has been driven by an uptick in SVOD services, this has also led to a rise in AVOD use.
In 2020, AVOD platforms in the U.S. collectively generated nearly 200 million active monthly users. Not only did monthly users increase, but so did the frequency of viewing, highlighting a greater conversion rate to daily usage, according to analyst Fateha Begum.
“AVOD users show a high propensity to consume content; they are content hungry, not cost conscious,” Begum said. “As AVOD services grow in popularity and improve their content offering and device accessibility, paid services will have to work harder.”
Indeed, Murdoch sees AVOD showcasing a new marketing channel for brands deploying targeted spots to tens of millions of video-bingeing eyeballs. Across Fox’s digital properties in 2020, usage was up 100%, advertising increased 70%, and active monthly usage increased 70%.
“In the coming years, we envision Tubi becoming a $1 billion business and a core pillar of Fox,” Murdoch said. “The business will ultimately become a very profitable one for us.”
Murdoch said that unlike other media companies, i.e. WarnerMedia, NBCUniversal, Disney and ViacomCBS, spending billions launching SVOD platforms and original content is a non-starter. He said Fox is focusing on AVOD to expand distribution of existing episodic content.
“We see the SVOD competitive set as the potential to lose very many billions of dollars,” Murdoch said. “We see it is very crowded. We see it is very hard to stand apart and differentiate ourselves within SVOD. And that’s why we’ve really chosen to embrace AVOD as our direct-to-consumer strategy.”
New data from eMarketer found Tubi streamed 2.5 billion hours of content, including 30,000 titles, to 33 million monthly active users in 2020. About 48% of total Tubi viewers don’t subscribe to pay-TV — including 58% of 18- to 34-year-olds. eMarketer projects streaming video use to outpace pay-TV by 2023, when access to 64.4 million households will exclusively default to streaming video.
As an ad strategy, the majority of Tubi users are incremental to linear and other AVOD platforms — but apparently loyal to the brand, according to the research firm. About 80% of its viewers can’t be reached across the top 25 cable TV networks. More than 68% don’t sample other AVODs, and 64% can’t be reached across other Fox Entertainment channels.
“We expect to win in AVOD and be the leading AVOD player in this country,” Murdoch said. “We expect to be able to do it by reinvesting our profits, but not by losing billions of dollars in programming costs or other costs in the time it takes to breakeven.”