Fox’s Tubi sees nearly 30% revenue growth as viewing time surges

Fox’s free ad-supported streaming TV service Tubi saw strong momentum, posting nearly 30% revenue growth for the September quarter with advertising monetization driven by increases in total viewing time on the platform.

Advertising strength at Tubi contributed to 5% total year on year revenue growth at Fox to reach $3.19 billion in the quarter, which was led by an 8% increase in total advertising revenue and 3% growth in affiliate revenues. In addition to Tubi, CEO Lachlan Murdoch said ad growth in the quarter was also driven by strong pricing at Fox News and Fox Sports, along with record first-quarter political revenues at the local station affiliates.

The revenue bump at Tubi is particularly impressive, as he noted it came during a quarter where industry-wide digital revenues appear to be under pressure.

Speaking on Tuesday’s fiscal year 2023 first quarter earnings call, Murdoch said that it looks like the broader national ad market is more fluid compared to last quarter, but macro impacts are not uniform across Fox’s verticals. He acknowledged Fox observed some softness in the linear entertainment scatter marketplace but suggested it’s not having a big impact on the business.

“Remember, Fox doesn’t over index to network entertainment, so any impact there is nominal to us, and has been more than offset by the digital entertainment strength delivered by Tubi,” he said.

Tubi in the September quarter delivered 29% revenue growth compared to a year ago, to reach around $165 million for the FAST service.

“This marks the first time that Tubi revenue has surpassed advertising revenue generated by Fox Entertainment in a meaningful way,” Murdoch said.

Success at Tubi was driven by strength across all major KPIs (key performance indicators), but especially by total viewing time (TVT) – which grew by 53% to reach 1.3 billion hours – representing its highest quarterly performance ever.

“Tubi’s impressive progress in growing audience, engagement and monetization is indicating that our investment strategy and operational focus is working excellent,” Murdoch continued.

He added that it’s really the increase in total viewing time that fuels “a tremendous amount” of monetization, as CPMs (cost per thousand) rates have held steady - so it’s not about Fox increasing pricing, but rather more time spent that’s offering advertisers more opportunities on the platform.

For viewing time, Tubi users have been tuning in across all genres, according to Murdoch, with the FAST’s core proposition on video on-demand.  Separately, recent survey data from Interpret found about 70% of Tubi users report watching content on the platform via on-demand, versus around 20% that say they watch live linear channels.  Over the past year Tubi has grown to over 200 FAST channels, offering a combination of news, general entertainment and sports. In September, for example,  the FAST turned up a dedicated channel to FIFA World Cup programming ahead of this year’s competition.

“Those FAST channels doing very well, growing rapidly, but are overall a smaller percentage of their TVT,” Murdoch noted. “But it’s pleasing that the growth has really been across the entire platform.”

As more streaming services are turning to an ad-supported model, Murdoch said the Tubi team has had several years head start in creating a best-in-class AVOD service and established ad-tech stack and ad-tech team – which is now combined with Fox and its advertising sales team that has a proven track record. Fox bought Tubi in 2020 for around $440 million.

“You couple that with largest library available in the United States, with 48,000 titles – which by the way is five times the Netflix library - the cross-platform opportunities that we are executing on across sports and news and entertainment, it really sort of provides a tremendous platform that’s absolutely taking off.”

Murdoch said Tubi’s been profitable in past quarters and added that compared to what peers are investing in their SVOD platforms, Fox’s Tubi investment is very modest. That said, he believes the dollars spent are wise as it’s an opportunity to cement a lead in the AVOD market.

Speaking about the run rate for Tubi, Fox CFO Steve Tomsic said Tubi saw a $50 million absolute EBITDA deficit in the quarter. Across all of last year Tubi investment resulted in an EBITDA deficit in the low $200 millions. Similar to last year, Fox expects to invest more heavily in Tubi the second half of the year compared to the first half but has not changed guidance around digital investments.

It’s also a good time to invest short-to-medium-term, Fox’s chief executive said – particularly as some households are feeling economic stress and having a free streaming TV service puts Tubi in a great position. He added that Tubi will benefit from any economic chills consumers may be experiencing.

And Fox anticipates the December quarter to also be fruitful, as revenue for Tubi is already pacing ahead of the September quarter at nearly 40% growth, according to Murdoch.

For its Fox Nation direct-to-consumer streaming service, the company said it was a stand-out quarter for subscribers, with total sub growth north of 45% and total hours watched up almost 70% versus last year. Although Fox did not discuss specific subscriber figures or viewing time, it did say the fiscal first quarter marked the highest ever for hours watched on Fox Nation, which launched in 2018.

And despite economic headwinds Fox continued to see advertising strength across linear news and sports portfolios, led by the pharmaceutical, restaurant and streaming categories. Fox said two-thirds of ad revenue was generated by live sports.

The company reported net income of $613 million, versus $708 million in the same quarter a year ago. Adjusted EBTIDA increased 3% to $1.09 billion.

Cable network programming revenues increased 1% to $1.43 billion, including affiliate fee revenue of $1.02 billion and advertising revenue of $316 million. A 2% bump in advertising revenue was led by Fox News Media. Other revenues increased by 9% to $86 million, primarily due to higher Fox Nation subscription revenues.

For its Television segment, revenues were up 8% to $1.71 billion.  Advertising revenue grew 11% to $905 million, mainly from higher political advertising and continued growth at Tubi. Affiliate fee revenues grew 6% to $682 million, driven by increases in fees from third-party Fox affiliates and higher average rates, which were partially offset by the impact of net subscriber declines at TV stations.