There’s no more “normal” process in the financial markets than quarterly earnings reports. When I worked at CNBC, we planned for “Earnings Season” like our own Oscars or Super Bowl. So I found it a bit remarkable how completely normal it seemed for Fox to be reporting Tubi’s ad revenues in its latest earnings release. The inclusion of this once-obscure Connected TV (CTV) service that Fox purchased last year bolsters the ever-growing “normalization” of CTV advertising as part of the core revenues of mainstream media.
Last year Fox completed the sale to The Walt Disney Co. of its Twentieth Century Fox film and TV production studios, regional sports networks, cable networks such as FX and its share in Hulu. What’s left in the “new” Fox is about as pure a financial play as you can get the value of “TV” – however you define it. Close to 99% of Fox’s revenues in the last quarter came from “cable networks programming” and “Television.” And Tubi is now a solid contributor to this. Tubi’s 4th quarter revenues (all advertising) are estimated at $105 million, which would be nearly 25% of the $441 million in ad revenues earned by Fox News Media (mostly Fox News Channel), the most valuable asset Fox owns. On the earnings call, Fox CEO Lachlan Murdoch said he expects Tubi to top $300 million of revenue in 2021, to be a $1 billion business in a few years and to ultimately represent “a core pillar of Fox.” And this is a business that Fox didn’t formally own until last April.
The centrality of Tubi to Fox’s future makes sense when you look at the growth in the CTV market. Broadcast networks (ABC, Fox, NBC and CBS) and to a lesser extent cable networks have always pointed to their unique reach – the percentage of U.S. households that tune in on a monthly basis. According to financial analyst MoffettNathanson, the broadcast networks reach between 58-60% of the 129 million U.S. households on a monthly basis, but the leading cable networks’ reach is significantly smaller, with TNT at 34%, TBS at 32%, ESPN at 30%, and USA Network at 26%.
A review by MoffettNathanson of the leading streaming platforms shows they are rapidly approaching cable network numbers with Amazon Prime Video at 41% reach, Roku 34%, Disney+ 30%, Pluto TV 26% and Tubi 24%. MoffettNathanson estimates that Tubi alone will reach 42% of U.S. households by 2025. It turns out that if more people watch more of your programming for more of their time, your ad sales will grow. This isn’t newfangled “digital math” – it’s about as “normal” a set of metrics as TV has and Connected TV is already a significant competitor.
Tubi’s streaming brethren and their business partners demonstrate the expanding breadth of this “normalization.” ViacomCBS, the owner of the ad-supported Pluto TV, noted in its most recent earnings call that Pluto TV doubled its ad revenue year over year, and CEO Bob Bakish made of point of highlighting the service’s first “$3 million sales day.” How much that figure is an exception rather than the rule is still to be determined, but there’s little doubt of its growing importance of Connected TV ad revenues to this most traditionally hidebound of media companies.
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Then there is the growing behemoth of Roku, which collects ad revenues not only from its own Roku Channel but more importantly its share of the revenue from apps on its CTV device. As late as 2016 Roku’s ad revenue was $66 million. And today? Recent market analysis projects Roku’s advertising revenue growth as 48% between 2020 and 2023, growing to $3.7 billion by 2024. Whether as an eventual acquisition by a bigger media entity or as a standalone company, that’s an immovable force in any definition of “TV.”
The tech infrastructure of CTV continues to evolve in the way one would expect of a “normal” media marketplace. In just the last week, Magnite purchased SpotX for $1.17 billion, roughly four times what its former owner RTL paid to take full control of SpotX only a few years ago. This combination will enhance their power as aggregators of CTV ad inventory from a wide range of programmers such as Discovery, Disney, ViacomCBS, WarnerMedia, Dish Network’s Sling TV, Roku, and TV manufacturers Samsung and Vizio. For both these inventory owners and for brands hungry to reach TV viewers, it helps reduce the fragmentation in the CTV market and only facilitates easier and more plentiful buying and selling. Magnite alone reported that the number of advertisers buying in the CTV space increased 2.5 times in the last year and there is little to suggest a slowdown in what looks more and more like the new normal.