Fox Corp. has turned down unsolicited offers of more than $2 billion for its Tubi streaming service, over four times what the company paid for the business, according to people familiar with the overtures.
Lachlan Murdoch, who runs Fox, wants to keep the fast-growing business, said the people, who asked not to be identified discussing internal deliberations. Fox bought Tubi for $440 million in 2020.
While the streaming wars waged by Netflix, Disney+ and Amazon Prime grab the attention of media investors, it’s free online TV that’s pulling in the new viewers these days. Tubi, the ad-supported service that features everything from episodes of the Fox hit The Masked Singer to the gossip site TMZ’s latest take on Harry and Meghan, is now one of the fastest-growing pieces of the Murdoch family’s media empire.
The service averages 61 million monthly users, up from 25 million when Fox bought it. Even with the online ad market challenged overall, Tubi’s sales grew 25% last quarter to more than $200 million, the company told investors this week.
Revenue at Tubi and other advertising-based video-on-demand, or AVOD services, such as Paramount Global’s Pluto, Roku and Amazon.com Inc.’s Freevee, is expected to double to $30 billion in the U.S. by 2026, according to Digital TV Research.
The surge is being driven in part by a feature called fast channels, which offer regularly scheduled programming online, much like traditional TV. That format is particularly appealing to older viewers who are used to TV program guides. Pluto, for example, has two channels that play nothing but Star Trek spinoffs all day long.
Last month Warner Bros. Discovery Inc., trying to generate more cash after its big merger, licensed hundreds of movies and TV shows including Westworld and Cake Boss to Tubi and Roku to air on their ad-supported platforms. Warner Bros. also plans to launch its own free streaming outlet. Netflix management has said they’re considering one as well.
To many industry observers, this is the future of TV viewing, as consumers migrate from traditional cable-TV packages to a combination of subscription and free-to-watch services.
“Five years from no one will talk about fast channels or AVOD,” said Guy Bisson, executive director of Ampere Analysis, a media research group. “It will be free TV or pay TV, just like it used to be.”
Tubi was founded in 2011 as AdRise, a company that aimed to sell advertising for a new generation of online video outlets. It was early in the video revolution, however, and three years later co-founder and Chief Executive Officer Farhad Massoudi decided to launch a direct-to-consumer business.
Massoudi, who was born in Philadelphia but raised in Iran, got his first hint at the potential of the service after Tubi aired Black Snake Moan. The 2006 Paramount Pictures film about a bluesman and a nymphomaniac became a hit on the service in 2015. More licensing deals with studios included Metro-Goldwyn-Mayer and Lions Gate Entertainment Corp.
This year, Tubi expects to produce 100 original programs, twice as many as 2022. The investment is costly, Tubi lost about $50 million in the most recent quarter as it continues to put money into original content.
But the company can move quickly. After seeing strong viewership last July for The Stepmother, a thriller with a largely Black cast, Tubi ordered a sequel and had it up on the service by December. More programming, including Westerns and a reality film about witchcraft, has been acquired based on viewer interest.
To Massoudi, Tubi represents a transition from mono-culture, where executives at a few big networks chose what people watch, to one where consumers vote with their remote controls from a seemingly limitless buffet of programs. Tubi now has 50,000 titles on its service, up from 20,000 three years ago.
“Instead of producing or buying one piece of content to attract the masses, we’re producing content that serves niche interests and superfandoms based on what we know our customers love,” Massoudi said.
