Tubi CEO: There's a difference between paying to watch ads and being free with ads

By Weston Blasi

Tubi had an average audience of 1 million viewers in May and is the second biggest free streaming platform - after YouTube

"Streamflation" has been a buzzword in the entertainment industry as customers have faced many inflation-like price hikes in recent years from streamers like Disney+ (DIS), Hulu, Netflix (NFLX) and Max.

But there are also still streaming platforms that are free. And one of the biggest free streamers is Tubi, whose revenue comes 100% from advertising, the company told MarketWatch.

"As the cost of having subscriptions to numerous premium streaming apps like Hulu, Prime, Netflix and others continues to rise, we are motivated as consumers to search for options that offer strong value at the least cost, and there's nothing cheaper than free," Jacqueline Corbelli, CEO of BrightLine, a technology-software company that specializes in television advertising, told MarketWatch.

There is momentum in the free streaming space compared with other platforms too. The Roku Channel, a free app and website with a similar ad-only business model, had a 36% increase in viewers year-over-year in May. Roku (ROKU) had 1.5% of the total TV market share last month, compared to Tubi's 1.8%, per Nielsen.

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"There's a difference between being free with ads, and asking people to pay to watch ads," Tubi CEO Anjali Sud told Decoder podcast host Nilay Patel about her company's unique business model in a crowded streaming space.

Sud, who said Tubi has 80 million monthly active users, has some data to back up her brand's recent success.

Tubi had an average audience of 1 million viewers in May, its most-watched month ever and a 46% increase from the previous month, according to Nielsen data. Tubi's average May viewers per day were higher than Disney+ (969,000 viewers), Paramount Global's( PARA) Paramount+, NBCUniversal's (CMCSA) Peacock and Warner Bros. Discovery's (WBD) Max.

Netflix, Hulu, Prime (AMZN) and YouTube (GOOG) were among the streamers that had more May viewers than Tubi, per Nielsen, and YouTube was the only free ad-supported digital platform with more viewers than Tubi.

"I think the streaming industry is up for grabs," said Sud, who has also held executive-level positions at Warner, Amazon and Vimeo (VMEO).

Sud believes her brand competes with not just streamers, but pretty much any app or activity that requests a person's attention.

"What you see today is incredible fragmentation and friction for the audience and viewer who just want to be entertained," Sud said. "What we have to do is build an offering that is easy and delightful and more entertaining than opening up TikTok or gaming."

But is running a free streaming platform with ads instead of monthly subscriptions a sustainable business model?

"It's viable for Tubi because of the difference in economics for the content offering it provides. It has very limited original programming and offers older content that is much cheaper to obtain the rights to stream," Corbelli told MarketWatch. "There is clearly an audience who will happily stream free content that is not the most coveted but adequate. This is a very specific approach to streaming that will remain viable for a considerable amount of time until it perhaps gets absorbed into a much larger streaming offering as part of their free/low end tier."

Tubi is owned by Fox Corp (FOXA). Both Fox Corp. and MarketWatch publisher Dow Jones are subsidiaries of News Corp. (NWSA)

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Tubi has the largest content library of any streamer: 250,000 movies and TV episodes, which is multiples more than the next biggest library, the company said.

Tubi doesn't often feature big studio films that came out in the last couple of years, and has a focus on classic films as well as random movies like ones you loved as a kid but forgot existed. Its library has some original content, but it tends to be lower-budget projects in comparison to the hundreds of millions of dollars big streamers often spend on some movies and shows. The Los Angeles-based streamer was founded in 2014 and started making original content in 2021.

"Because we have such a large library, when you are trying to find that one movie, we are there," Sud said. "In a weird way, we are trying to be the best of Netflix plus the best of YouTube. We want to offer great movies and TV shows, but it's also this vast long tail free library... it's already working."

"We bring content to the service in a few different ways, including more traditional licensing and acquisition, our own Tubi Original productions and we have programs that enable innovation in the content pipeline, including platforming unheard voices through independent distributors, our partnership with the Black List and Stubios, our fan-fueled studio," Adam Lewinson, Tubi Chief Content Officer, told MarketWatch. "We have been honing personalized experiences for over a decade, investing and iterating on machine learning and AI-driven models that serve our viewers the world's largest content library driving them into the fandoms and rabbit holes they love."

It's unclear if Tubi currently makes a profit, as Lewinson declined to say how much the streamer spends on content.

See also: Amid 'streamflation,' consumers are spending more on TV streaming than ever

Tubi's app can be downloaded for free via most app stores, and is available on iOS, Roku, Apple TV (AAPL), Amazon Fire TV, Xbox, many smart TVs, PlayStation and Android. It can also be accessed through the internet.

Throughout Sud's interview, she emphasized Tubi's push to make viewing "frictionless."

As a free service, there is no push to get people to insert credit card information, and there's also no need to create an account at all. Even if a consumer doesn't have the Tubi app, they can search Tubi.com and begin watching a movie with two clicks in less than 10 seconds.

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-Weston Blasi

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

06-26-24 1210ET

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