Tubi

Tubi is a free, ad-supported video streaming service owned by Fox Corporation. Think of it as television the old-fashioned way, but on demand. Instead of paying a monthly fee like you would for Netflix or Disney+, viewers watch content for free and see periodic commercial breaks, just like on broadcast TV. This business model is known as AVOD (Advertising-based Video on Demand). Tubi's main appeal isn't necessarily the latest blockbuster original series; instead, its strength lies in its enormous and eclectic library. With tens of thousands of movies and TV shows, it's like a giant digital video store from the 90s, packed with everything from classic films and cult favorites to B-movies and niche documentaries. For viewers tired of endless subscriptions or looking for a specific older title, Tubi offers a vast and cost-free alternative.

In a world saturated with paid streaming options, the concept of “subscription fatigue” is very real. Consumers are increasingly selective about how many monthly services they're willing to pay for. Tubi cleverly sidesteps this problem entirely. Its “free lunch” is paid for by advertisers who want to reach the millions of viewers on its platform. This AVOD model has two powerful advantages:

• Low Barrier to Entry: It costs a user nothing to start watching. This allows Tubi to attract a massive audience, including those who are more budget-conscious.
• Direct Play on Advertising: The business benefits directly from the shift of advertising dollars from traditional cable to Connected TV (CTV) platforms. As more people watch content on smart TVs and connected devices, Tubi is perfectly positioned to capture that ad spend.

The trade-off, of course, is that viewers must watch ads, and the content library, while vast, is generally older. Tubi is not competing to have the buzziest new show; it's competing to be the best free option available.

Fox Corporation acquired Tubi in 2020 for $440 million, a move that many now see as a stroke of genius. For Fox, a media giant heavily invested in traditional cable (Fox News) and broadcast (Fox Sports), Tubi provides a vital foothold in the future of media consumption. It's their direct-to-consumer growth engine in a world of cord-cutters. The synergy is compelling. Fox can use its massive marketing power and established ad-sales relationships to supercharge Tubi's growth. It can also funnel its own content, such as sports and news clips, onto the platform to attract new viewers. In return, Tubi gives Fox a treasure trove of data on modern viewing habits and a direct pipeline to a younger, digital-native audience that may not watch traditional television.

You cannot buy shares of Tubi directly, as it is a subsidiary of Fox Corporation. For a value investor, the key is to understand Tubi's role as a critical, and perhaps undervalued, component of its parent company.

At first glance, “free” might not seem like a durable competitive advantage. However, Tubi has been building a subtle but effective economic moat based on:

• Scale and Brand: Tubi is one of the largest and most recognized names in the AVOD space. This brand recognition creates a flywheel: more viewers attract more advertisers, which provides the revenue to license more content, which in turn attracts even more viewers.
• A Niche Library: By focusing on a massive “long-tail” library rather than expensive originals, Tubi has carved out a unique space. It has become the go-to platform for a wide variety of content you simply can't find on the major SVOD (Subscription Video on Demand) services.
• Data Advantage: Every movie watched and ad seen provides valuable data, allowing Tubi to refine its content recommendations and offer advertisers highly targeted campaigns, making the platform more valuable over time.

When analyzing Tubi's contribution to Fox, investors should focus on a few key performance indicators (KPIs) that signal the health and growth of the platform:

• Total Viewing Time (TVT): This is arguably the most important metric. It measures user engagement. Higher TVT means more hours watched and, crucially, more opportunities to show ads.
• Monthly Active Users (MAUs): A measure of the platform's reach and audience size.
• ARPU (Average Revenue Per User): This shows how effectively Tubi is monetizing its audience. Growing ARPU indicates that the company is getting better at selling ads at higher prices.

For investors, the most common way to approach this is through a Sum-of-the-Parts (SOTP) analysis. This involves estimating the value of each of Fox's major business segments (Cable Networks, Television, etc.) individually and then adding them together. Tubi is often considered the high-growth “hidden gem” in this calculation. An investor might argue that the stock market is valuing Fox based on its legacy media assets while underappreciating the explosive growth potential of Tubi. If an SOTP analysis suggests the combined pieces are worth significantly more than Fox's current market capitalization, it could represent a classic value opportunity.