While Fox's (FOX +0.55%) (FOXA 0.03%) recently reported fiscal second-quarter results were notable in their own right, one of the most surprising takeaways from the report was a single data point on the company's ad-supported video streaming service. Tubi saw its ad revenue grow 25% year over year, management said.
"Revenue and engagement [key performance indicators] at Tubi have far exceeded our expectations and are consistently growing in the healthy double-digit range since we acquired it almost three years ago," explained Fox CEO Lachlan Murdoch in the company's fiscal second-quarter earnings call.
Here's why this growth is so impressive -- and why Fox is excited about Tubi.
NASDAQ: FOX
Key Data Points
Fox's rapidly growing streaming service
Given the tough macroeconomic environment, Fox's 4% year-over-year growth in its top line for fiscal Q2 was notable. Its increase in total advertising revenue of the same percentage was particularly encouraging, considering a handful of companies highly reliant on advertising revenue have announced results well below analysts' average estimates for the same period. Facebook parent Meta Platforms even saw its revenue decline year over year.
But Fox's 25% year-over-year growth in Tubi advertising revenue was particularly impressive. The company's strong growth in ad revenue on the streaming platform was fueled by record viewership and robust advertiser demand. Indeed, Murdoch said that Fox isn't really seeing the soft advertiser demand some other companies have pointed to -- and the CEO said that when speaking about advertising demand across its overall business.
Of course, Tubi is still small relative to Fox's overall business. Management said that advertising revenue from the streaming service "exceeded $200 million" during the quarter. This is a fraction of the company's more than $4.6 billion in total quarterly revenue. But, despite Tubi's small size, management is extremely bullish on the streaming service. Murdoch said Tubi "leads our streaming strategy" -- and it does so "with minimal investment when compared to our peers."
Looking ahead
But what about the current quarter? Has an uncertain macroeconomic environment led to deteriorating demand in early 2023? Fox said in the company's earnings call that its trend of rapid growth in view time and ad revenue has "continued early into [fiscal Q3] as Tubi adds viewers and content to the platform."
Overall, Fox looks well-positioned for continued growth in the current quarter, and likely throughout the year. Helping Tubi and the rest of Fox's business is the overall strength of the company's content portfolio. Being a leader in news and sports helps set the company apart from peers in the advertising market, Murdoch explained in the company's earnings call. The CEO acknowledged that Fox's relative strength in advertising isn't necessarily indicative of the overall marketplace but rather of its brands and of the company's execution.
Going forward, Tubi will likely grow in importance to management and investors, winning over more content from the parent company, more ad dollars from marketers, and more view time from customers. This will ultimately help further leverage Fox's unique content portfolio.
