Another deal that shows media majors are upping the ante in streaming wars.

Fox Corporation (NASDAQ: FOXA) snapped up direct-to-consumer streaming startup Tubi for $440 million in cash. Simultaneously, Fox disposed of its 5% stake in streaming platform Roku, using the cash for the new acquisition. Tubi, a start-up based in San Francisco, is an ad-supported streaming service. It provides content from over 250 partners, including Paramount and Lions Gate. (The Hollywood Reporter)

Fox’s acquisition of Tubi follows Comcast’s (NASDAQ: CMCSA) purchase of the streaming service Xumo last month, and Viacom’s (NASDAQGS: VIAB) buyout of Pluto TV last year.

The media industry has, in recent years, taken a shine to ad-supported video-on-demand services (AVOD) as separate from the subscription-based video-on-demand sector led by Netflix.

Tubi’s payday

To date, Tubi has raised just $26 million in funding. It last raised $20 million in a Series C round in May 2017 according to Crunchbase. That round was led by Jump Capital.

The platform currently has 25 million users. They spend about 160 million hours a month viewing its ad-supported but free content. That comprises non-exclusive licensed TV shows and movies.

As at the end of 2019, the streaming video startup had about 229 employees. That number was up 78% for the year.

“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,” Tubi’s founder and CEO Farhad Massoudi said.

Fox’s strategy

“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,” Fox Corp. CEO Lachlan Murdoch said in a statement. “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.”

Furthermore, Fox will operate Tubi is an independent subsidiary. However, Massoudi will continue to lead the platform.

Shedding some light on its plans for the acquisition, Fox said it will “evaluate opportunities to expand the Tubi offering not through original content, but rather in a cost-effective manner by leveraging our expertise in national and local news and sports programming.”

Subject to regulatory approvals, the transaction will likely close by June 2020.

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