(Bloomberg) -- Fox Corp.’s free streaming service Tubi, which has attracted millions of users with a mix of old movies and reruns, plans to start funding original programs — a sign of its mounting ambitions after a year of record growth.
Tubi will start off by focusing on original movies, but has discussed spending as much as $4 million an episode on new TV series, according to people familiar with the plans. The company is still talking to advertisers about partnerships for its first slate of programs, said the people, who asked not to be identified because plans haven’t been announced.
Fox Chief Financial Officer Steve Tomsic discussed the idea of making originals during an investment conference this week, saying the company would “cost effectively” look at it. But Tubi will steer clear of the expensive shows you see on paid streaming platforms, he said.
“It’s often these really cost-effective titles that a lot of the viewership resides in,” Tomsic said.
Tubi is one of the leaders in the booming market for free, advertising-supported streaming services. Its customer base grew to 33 million people as of last September, and usage of Tubi in 2020 jumped 58%. The service will make $300 million in ad revenue this fiscal year, and that could climb to $1 billion in the coming years, Tomsic said.
Two of its peers, Roku Inc. and ViacomCBS Inc.’s Pluto TV, are also exploring original programming as a way to lure new users and generate additional advertising sales.
These services have grown thus far by offering repackaged content, but they’re now in a position to use their growing capital base to fund original series — a bid to stand out in a crowded market and attract more advertisers. Pluto has held preliminary discussions about original programming with studios, but has yet to formulate a slate.
They are aping the transition made by paid streaming services Netflix Inc. and Hulu, which started by offering reruns and licensed programs and now rely largely on original series to lure new customers. While much of the focus in Hollywood right now is on paid streaming platforms, many media companies see as big an opportunity in free services.
Roku, which makes set-top streaming boxes along with its own service, has already begun to fund shows. The company acquired original programs for its Roku Channel from the library of the defunct streaming service Quibi. Roku also has begun hiring former programming executives from Quibi as well.
These initial moves into original programming are a test, informed by data the company has on what its customers like. But original programming is expensive, and that may make it difficult for services that are still small in terms of revenue. Video platforms such as Vimeo and Vudu have decided not to compete in the market for original content. And even YouTube, owned by one of the most valuable companies in the world, has scaled down its investment in original series, opting to stick with user-generated fare.
For now, Pluto offers live channels dedicated to James Bond or old reality TV — and that’s been enough to keep it growing quickly, especially during a pandemic. The company increased its user base by 80% in 2020, reaching 43 million people globally.
Tubi, meanwhile, offers a library of more than 30,000 movies and shows on-demand. It also recently signed a deal for a large slate of anime titles. The company is a key area of growth for Fox, which is otherwise reliant on traditional TV: its namesake broadcast network, news channel and sports division.
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