Fox Buys Tubi For $440M

Fox Corp FOXA is buying ad-supported video service Tubi in a bid to boost its footprint in the emerging world of streaming TV content delivery.

Fox said Tuesday it will buy Tubi for about $440 million in net cash consideration.

Why It's Important

The move shows Fox is hoping to be a player in the move to streaming delivery, which is where TV is going.

"The acquisition could have a significant impact on the size of FOXA's digital properties which is important as digital is increasingly becoming part of the cost of doing business for media companies in advertising," Rosenblatt Securities analyst Bernie McTernan wrote in a note. He warned it may not go far enough, however, noting Tubi is small, and there's a lot of competition in the ad-based video-on-demand business.

The knock on Fox, and key to McTernan's Sell rating on the stock, is it lacks the assets to move away from bundled TV delivery like through cable to the emerging direct-to-consumer market. This move would double Fox's hours of content consumed on digital platforms, McTernan said, even though it would still be small in the context of Fox's overall ad revenue.

Fox notes Tubi also brings in a "younger-skewing" and already connected user base that spends more than 160 million hours on Tubi already.

McTernan has a Sell rating and $33 price target on Fox.

What's Next

The acquisition is expected to close before June 30, Fox said.

Fox shares were down more than 7.5% on Wednesday morning, trading at $23.25 as the market as a whole dropped again amid broader economic and coronavirus fears. 

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