Tubi Takes on YouTube, and a Michael Jackson Movie Update

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1:08A detail in the most recent earnings report from Fox caught my eye. Tubi, that's Fox's free ad-supported television platform, or Fast Channel as they're known, it's now profitable. In fact, its revenue growth shot up 27 % and viewing time was up 18 % last quarter, according to Lachlan Murdoch, the CEO. And profit margins, he says, will now be in the 20 % to 25 % level. That's pretty big, and it's a change from last April when we had the CEO of Tubi on the town, and I grilled her about this very issue, the path to profitability in ad-supported streaming, which we all know is the north star now for these media companies.

1:47They're all struggling to compete with YouTube and Netflix and get real money out of these services. Tubi is now up to 2.1 % of all viewing on connected TVs, according to Nielsen, ahead of Paramount Plus and Pluto Combined, plus Peacock and HBO Max. It helps that it's free, of course, so it's not the same business model as these subscription platforms. A lot of it is licensed content, old shows on a revenue share model. And increasingly, though, it's doing originals. The platform just announced a partnership with Kevin Hart's company, and this morning they set new deals with YouTubers like KevOnStage and Big John, Dan, and Raya.

2:25No, I don't know who those people are, but they are big on YouTube, and they are sort of second-tier creators with highly engaged followings that Tubi thinks can bring people to the platform. But they start watching other stuff and generate time spent and grow the 100 million monthly active users that the platform boasts. So it's a good time for a Tubi check-in. We've got Anjali Sood, the CEO, back on the show. Today, it's how Tubi became profitable, the new creator push in the state of play in free ad-supported streaming. From The Ringer and Puck, I'm Matt Bellany, and this is The Town.

3:01Okay, we are here with Anjali Sood, the CEO of Tubi and a returning champion on The Town. Welcome back, Anjali. Thanks, Matt. Glad to be back. Okay, so we had you on about a year and a half ago. And among the questioning, I grilled you on the profitability issue with Tubi. I got some comments after you were on, I remember, that Tubi gets all this great press, they're growing, they have this nice audience, but when are they going to be profitable? So you shot back this week, your boss, Lachlan Murdoch, said that Tubi is now profitable. How did that happen? How did you get there way earlier than people thought?

3:43Yeah, it's a big milestone for Tubi and I think a really good validation of our model. And the short answer is we got there by growing profitably. Well, okay, but how did you grow profitably? What's exciting about our profitability is I do think it's sustainable. And it's because it's not coming from us cutting our costs. It's coming from us growing faster. So we've been growing our viewership and engagement faster. Our revenue growth is accelerating. And that allows us to continue to invest in content and technology. But when your top line is growing faster than those investments, you get more and more efficient and therefore more and more profitable.

4:22And I think the underlying that, what we're seeing is just we're 100 % free streaming for consumers. There's huge tailwinds there. Is that the economy? People are, you know, we see all this data that people are more squeezed on their expendable money. So maybe they're more interested in free. Streaming costs rise. It certainly helps us. But I think it's a broader tailwind. I think it's for younger audiences gravitating to free because that's how they're entertained on social media and in other platforms. And then also just the fact that if you just think about the value prop of streaming, if you have to pay more money and content continues to be more fragmented, the value prop isn't improving.

5:01Whereas in Tubi's case, we're growing our content. We're improving our offering while remaining free. So our value prop just gets better and better and that resonates. How much did the Super Bowl help? Because this was a pretty big deal. You guys live streamed the Super Bowl and you had some shoulder content that was original around the Super Bowl. Give us a sense of what kind of bump you got from that big moment. The Super Bowl was an unqualified success, I think, for everybody. And for Tubi, we had 24 million viewers on game day. That's huge. It's huge. And did you get there? You got their emails.

5:39You signed them up, right? We did. And I think we've done a really nice job of retaining them. So the Super Bowl was great marketing for Tubi. I also think we expanded the audience more broadly. It was the most streamed Super Bowl ever. And if you look at the viewers on Tubi, you know, we're 40 percent, age is 18 to 34, half female. And so I think what we really did was we expanded the audience beyond just the hardcore sports fans who are going to watch the Super Bowl anyway. And we attracted the people who are maybe more interested in the Super Bowl as a cultural moment. And that's why we did kind of a red carpet before and we were more focused on sort of the fashion and the culture around the game.

6:20And it was a great success. And by the way, we're going to be streaming on Thanksgiving Day, the NFL Lions versus Packers game. So looking to kind of replicate that success. So does the NFL let you guys do whatever you want? Can Fox just stream every game on Tubi if they want? It's much more complicated than that. I imagine so. And no, that's not our plan and strategy. Live sports is not an area that Tubi is going to invest in on a free ad supported basis. That's likely not going to work. But what we are looking at is where are there games that are cultural moments, where there is value in exposing and leveraging the power of Tubi's audience.

6:59And we can actually grow that audience, not just for Fox and Tubi, but for the leagues. And that, I think, is where you'll see us quite thoughtful and selective. But we do think it's a win-win for everyone in the ecosystem when we can do that. Okay. So you guys just announced a bunch of deals with creators. You're putting creator content. I could go through the names. I don't know who these people are. Rock Squad, Kev On Stage, The One Shoe. I'm sure they're big. Craig, do you know any of these people? I'm sure I do. Yeah, but that doesn't matter. What does matter for the business is that you guys are going the creator route.

7:38It seems everyone here in the streaming ecosystem wants to be YouTube. They're going after creators. Netflix is going after podcasts. Like, is that the end game here? Everyone's just going after that YouTube market share of viewing time? It's not our end game. For us, we want to be free streaming for every fandom. And I think our approach is just When we want to super serve our fans, we need to be able to get them content, whether it's produced by a Hollywood studio, an original that we make, it's a digital first creator, it's an independent filmmaker. And for us, it's about finding the fandom and then giving them more.

8:15And so you'll see like when we choose creators to work with, we're actually not focused on the size of their following. We're much more interested in is there a fandom that we know that is very vibrant on Tubi? They're looking for more content. And are there creators that have super engaged, I would say, obsessive fandoms? And so we'll look for creators, which I think is different from others in the industry. We're not necessarily focused on the creators that are sort of the very tippy top of the pyramid, right? That have these huge, huge followings. Well, you did have some Mr. Beast content, but I don't believe that was exclusive.

8:51That's right, yes. We actually have 10 ,000 titles that we've added to the platform in the last few months of non-exclusive content. Mr. Beast, Jordan and Salish Matter, like some big names you'd know. And that's really important to us and is actually doing very well on the platform. But what we announced today and what you'll see us do more is more exclusives with creators where we just can see that they have a passionate fandom. And, you know, these are people who are buying merch and they're in the comments and they're, you know, they're showing up to the events. And there's real fan love. And these are creators who want more creative freedom.

9:24We're not trying to replace their business on YouTube. We're trying to augment and help them grow. And pay them, presumably. Absolutely. But do you pay them up front or is it strict rev share? Most of what we're doing is RevShare. I think we like that model. Yeah, well, it's very successful for YouTube. Yeah, and by the way, I think that's going really well. What you'll see us start to do is we will start to experiment with, are there ways we can do sort of equivalent of a licensed deal? But in classic 2B fashion, this is going to be not focused on, we're not a hits business, you know, and you're not going to see us look to do big, big deals.

10:02You're a volume business. we're long tail and we're proudly long tail. And I think what we do really well is we help every story find its audience. And we do that at scale and we do it with a flywheel that gets better and better every time. Yeah. And one interesting line in your press release about this creator deal said that you guys have seen that viewers who start their, what you call Tubi journey, meaning viewers who come to Tubi for these creators shows are retained stronger. So it's stronger retention. if you come to Tubi for a particular creator's show. But doesn't that suggest it is kind of a hits business?

10:39You're luring them in with this content that is a hit. What we're seeing is that people who come in to watch creator content are retaining longer on Tubi. They're watching more content. And what's really interesting, Matt, is that they might come in to watch creator content, but then they'll end up watching Hollywood studio content or a movie from an indie filmmaker. And it's really just our ability to personalize the experience for them. Leveraging their followings. Yeah. And by the way, that also means that Tubi is doing a good job of exposing our audience to these creators. The other thing that's really interesting around what we're seeing, it's just really on the creator side, but we're also seeing that the audience coming in, probably not surprisingly, is younger.

11:21They're more, you know, mobile first and then moving to CTV. They're just behaving in ways that we think are very interesting and we want to invest did more. And more broadly, I would just say, we believe that creators are going to be the next generation of storytellers and talent, and they have a direct line to culture. And everything that we hear from our audience is like, they want that. And it shouldn't be at the expense of also some of the other type of original content or Hollywood content. And so what's most interesting to me is how these things can all come together and really sort of grow the pie for everybody.

11:58No podcasts? We just announced the number one true crime podcaster, Ashley Flowers, to be will be distributing her video podcasts. And I think, you know, podcasts are interesting. Well, everybody seems to be interested in them now. Everyone except every pod, except for the town. Nobody wants the town. We don't even do video yet. We will do video at some point. Then we should talk. Yes, exactly. No, Netflix does not want the town. They have a big deal with The Ringer and no town. I would say this way. We're not. interested in podcasts because it's the medium. We're interested in the fact that we have true crime fans who want more true crime.

12:35And there are plenty of different ways we'll look to bring them that. And one of them might be the podcast and one of them will be an original slate. One of them will be like all the different ways that we're going to bring that content to that audience. I think that's really what is driving our decision making on what to platform and what that platform. Okay. Lachlan did say on the earnings call that the profitability of Tubi and the streaming division might mean that you guys will curb spending a bit. What does that mean practically? We don't have plans to curb our spending. So we did grow our operating expenses.

13:11We continue to grow our content and technology investments. And as I said, it's really more about just growing our engagement and revenue even faster. And I don't expect that to change. We are in a market where there's just plenty of opportunity still in free ad-supported streaming. I think we're just getting started. And I would actually say the interesting thing will be, where do we find places to take bigger swings based on what we learn in the creator space? And so to me, the real thing will be, how do we continue to get more efficient and more profitable while also being aggressive and ambitious in this market, I think we're striking the right balance.

13:52And Fox has been very supportive of that. By bigger swings, you mean bigger shows, bigger originals. When we last talked, you guys were about to launch some originals. You had a Lauren Graham show. You had some other stuff. What's the data showing you about what is working and not working on the platform? Are these originals working, generally speaking? Should the talent community think of Tubi as an active buyer of shows and movies? I'd say originals are working well. And particularly when they, the way that we use them, which is, again, it's not about being a hit. And actually, we're not looking to go significantly up in our budgets.

14:30But what we are looking to do is serve those fandoms. And we do have hundreds of originals. You are going to see us continue to launch originals. Probably one of the most interesting things that has happened in the last year. So Luminate has this like top 10 streaming charts. Tubi originals have shown up 17 times in the top 10 in the last year. And these are titles that I think most people would not expect would be on there. An example would be R.L. Stein's Pumpkinhead is an original we did for our horror fans for this Halloween. We took a book in the IP of a book and we made a movie and there's no marketing budget.

15:09it's, you know, I would say, you know, it's not what you would typically see in Hollywood. That's organically making it into the top 10. Why? Because we're listening to our audience. We know what they want and then we're going and making it for them. But that's a hits driven business. It's kind of weird that you're saying that we don't care about hits. Like that's a hits business, looking for things that people want and serving it to them in very specific ways, not just licensing 25 different catalogs and throwing them on the service. To me, that is putting your viewers first and focusing on fandoms.

15:45When I say hits-driven, I just mean we're not programming for monoculture. We're not trying to find one title that everyone will like. We're saying it's a hit if the people who are passionate about that watch it, find it, and watch it, even if the number of viewers isn't massive, right? And I think to me, it's not thinking about it from a quality or a quantity perspective. It's thinking about a quality and depth of engagement. And that for us is, that's our model. And so that's why you'll see we will make a lot of originals, but they're not going to be, you know, things that are less like and have A-list talent.

16:24They're not going to start in the box office. They're not going to have huge marketing campaigns around them. We will be relying on sort of the virality and the sort of organic interest from fans on social and on our own platform to drive that marketing. I wonder how the other Fox platforms play into this because we had Pete Distat on the show a couple months ago with the launch of Fox One. That is the new streamer where you can get the Fox broadcast channel and all the other Fox portfolio channels on streaming. How does Tubi fit into that? Because I went to that presentation and I know they were selling Fox One, not Tubi, but it didn't seem like Tubi was that integrated into the Fox One experience.

17:09Is that on purpose? Are you trying to kind of keep these separate or is one a funnel into another and vice versa? We're not integrated today and we're super open and Pete and I are always talking about ways to do that. But I would say the role that Tubi plays within the Fox portfolio is very strategic, which is it's expanding the audience to that cordless, younger, more multicultural audience that's not traditionally on broadcasting cable. And that is ultimately, you want to expand your audience. Advertisers want to be able to reach that audience. And that's really what's, I think, most interesting.

17:45Are there opportunities for Tubi and Fox One? Absolutely. Don't forget Fox Nation. Got to get the Kevin Costner Yellowstone National Park documentary going. There are plenty, plenty of opportunities like that. And I think the more that Tubi does well at its strategy, the wider our audience gets, the better we can be about really thinking about which of those audiences that we do want to expose to the rest of the Fox portfolio. But what I can tell you is we will always start with what makes sense for the viewer and the audience. And I don't think you'll see, and I don't think this is sort of Fox's MO.

18:21I don't think you'll see us kind of force integrations or sort of synergies, if you will, when they don't make sense.

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20:04Fast, reliable internet means everything for your business. and even this podcast. That's why I trust Spectrum Business. They keep companies of all sizes connected with internet, advanced Wi-Fi, phone, TV, mobile services, plus 24-7 US-based support. Millions of business owners already trust Spectrum Business. So visit spectrum.com slash business to learn more. Restrictions apply. Services not available in all areas. You're a very good spokesperson for your brand, but I want to ask you what scares you. What scares you in the AVOD fast landscape right now or the streaming landscape overall? I'll say very honestly, I'm not scared.

20:46You know what I mean, though. What's concerning? What do you consider challenges? I think the biggest challenge for us is surprisingly less about competition because we've been competing with huge players across Hollywood and big tech for many, many years. You go up against Amazon, you got to know what you're doing. We've been at that game for a long time. And like I said, I think we actually have the power of focus is underestimated in this industry. Amazon folded Freebie. That was your big competitor in the free space at Amazon. They folded it into Prime Video. I think we may be one of the last PurePlay free streamers left, and we love that.

21:22Well, Roku Channel, right? Yes. So I would say the Roku Channel is part of Roku, which has an operating system and other aspects. I mean, they've had big increases. You must be looking at those numbers. You know, very honestly, we don't spend a ton of time thinking about the competition. What I think about most is our own ability to just continue. To me, I see it as tailwinds are huge. AI is, I think, going to be an even bigger tailwind because you're going to see even more stories and storytellers that need to find an audience. And I think for us, it's more like, how do we make sure we execute and take advantage of this moment and the fact that we have the right model at the right time?

22:00and how do we make sure we have the best value prop in free streaming? And for me, it's making sure that we don't deviate from that. We don't lose our focus and we continue to put the fans first. I feel pretty good that if we do that, we will be one of the winners. And by the way, it's not a zero-sum game. We don't need our competitors to fail in order to succeed. If our viewers win, we win. What about Pluto? They are a competitor of yours. They are under the Paramount banner. Paramount has a new owner. They're talking about supercharging it with the magic Silicon Valley fairy dust of Oracle and putting Pluto on the same tech stack as Paramount Plus and having one big funnel that is going to dominate streaming.

22:43Look, consolidation is expected and appropriate, I would say, in a market that's maturing. But I don't think free streaming is maturing. And I would just say others are going to be spending a lot of time integrating infrastructure and libraries. And 2B, we have a window to just continue to focus and do what we do well. And we'll look to take advantage of that. So why should a creator be on the 2B platform rather than YouTube? or is it just be everywhere and we're everywhere? It's the latter. I think our, as I said, we don't want to replace YouTube. I used to work at Vimeo. I've been in that side of the world for a long time.

23:24And I would say for us, it's more that how can we be incremental? Yeah, that's a very different argument than what Netflix is making to some of these people. Like come over to Netflix and do it here. And then we take you off YouTube. Although Rachel, Miss Rachel and Coco Mellon are still there. but like with the podcast push, they want exclusive stuff. So you're not saying abandon YouTube. You're just saying, let's expand your portfolio with something that is more targeted and can get you a new audience. That is the role we hope to play. And I would say, yeah, we're not taking a traditional studio approach to the creator economy, right?

23:59We're not trying to own the IP. We want creators to own their IP. We would love if they put exclusive windows or first windows or first looks or interesting projects on Tubi. And we want to work with them to make sure that they expand their audience and that they make more money. But we think we can do that. We're at a scale. We enjoy, you know, CTV streaming CPMs on our views, which is different from social UGC. Those who don't know, that just means you get more money. You get more money for your ads. Yeah, there's multiple reasons why we think we can be incremental and help expand. And then, like I said, we're also focusing not just on the creators that everyone else will be willing to, you know, to do big deals with, We're interested in sort of that other group of creators as well.

24:45And how do we help them be successful? And how do we give them a path to Hollywood? And I think if we, it's early and we will have to be agile and we will have to adapt based on what we see. But so far, the reception from creators has been, let's say, better than we expected. And we are seeing some creators who are being quite successful on Tubi even in the first few months. And what does that mean? Expanding their audience, growing their business, making more money. Yeah. Okay. It's about creative freedom to do stuff in long form that they maybe wanted to do, but it's hard to do when you're optimizing for the YouTube algorithm.